While borrower interest in purchasing and refinancing continues to fall, mortgage rates and average loan sizes are climbing.
According to the Mortgage Bankers Association weekly survey, interest in mortgage applications fell 8.1 percent from the previous week.
The Purchase Index also fell 10 percent from the week prior, while the Refinance Index decreased 7 percent.
The drops were a result of 30-year fixed mortgage rates hitting 3.83 percent last week.
Rates are following the 10-year Treasury yield and other bonds as the Federal Reserve continues to move toward removal of pandemic-driven policies, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Meanwhile, the average loan size reached another record high of $446,000.
Kan said purchase activity is currently dominated by larger loan balances due to tight inventory for entry-level buyers.
Experts say the surge in home prices and lack of inventory are making owning a home more difficult for middle-class Americans.
Rates currently are at the mercy of the Fed’s decisions as members work to curb rising inflation.
The fall in buyer demand was expected due to rising rates, but experts say it didn’t happen as quickly as many would have thought.
At the start of the year, demand continued to be strong as buyers rushed to snag deals while rates fluctuated yet remained historically favorable.
Now, due to lack of inventory, most buying activity is tilted toward the higher end of the market where more supply exists.
According to experts, homes sold at a record pace for January, revealing more buyer activity than usual for that time of year.
Also, about half as many borrowers as a year ago would be able to benefit from refinancing due to rising rates.
Refinance activity decreased to 56.2 percent of total applications.
While the window of opportunity appears to be closing for many borrowers due to current rates, experts are anticipating the Fed’s actions are what will bring sustained market improvement.
Borrowers eager to make a move in the current market should seek out an experienced lender, experts say.
They advise that making a move right now, whether buying or refinancing, is more about someone’s personal financial picture and location rather than market fluctuations.
Factors such as debt-to-income (DTI) ratio, down payment amount, and credit score will influence a borrower’s personal rate.If buying or refinancing isn’t an option for a borrower, experts also recommend asking a lender about ways to tap into home equity for home improvement projects or other large purchases.