Demand for mortgages is rising despite volatile interest rates

Demand for mortgage loans increased for the second week in a row despite some volatility in mortgage interest rates.

The total volume of applications rose 6.5% last week compared to the previous week, according to the Realkreditforeningen’s seasonally adjusted index.

The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell to 6.71% from 6.79%, with points falling to 0.79 from 0.80 (including the origination fee) for loans with a decrease of 20% payment.

That was the average, but mortgage rates were broadly higher for most of the week before falling sharply on Friday on news of the Silicon Valley Bank failure.

Despite rates being higher, mortgage applications to buy a home rose 7% for the week, but were still 38% lower than the same week a year ago. Home purchases largely stalled in early February after prices rose about a full percentage point, but they appear to be rebounding now, perhaps because buyers are worried that prices will go even higher. The question is how long will it last?

“It always happens when prices go up, and it only lasts a few weeks,” said John Burns of John Burns Real Estate Consulting, who said he saw an increase in sales of new construction homes in February despite higher prices.

Lennar, the nation’s second-largest homebuilder, posted better-than-expected earnings Tuesday, with the company’s chairman, Stuart Miller, saying in the announcement: “Homebuyers are considering the possibility that today’s interest rate environment may be the new normal. Accordingly, the housing market continues to shift as growing household and family formation continued to drive demand against a chronic supply shortage.”

Applications for refinancing a home loan rose 5% compared to the previous week, but were 74% lower than a year ago.

Mortgage rates fell further on Monday, according to a separate survey by Mortgage News Daily, but rose again on Tuesday after the consumer price index for February was released, suggesting the Federal Reserve may raise interest rates again next week despite recent turmoil in the banking sector .

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