Wild swings in mortgage rates last week sparked a rare surge in refinancing

After falling at the end of July, mortgage rates rose on average again last week, but daily movements were volatile. According to the Mortgage Bankers Association’s seasonally adjusted index, demand for mortgages was mixed, with gains in refinancing but declines in home buyer applications.

The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased from 5.43% to 5.47% from 5.43%, with points rising to 0.80 from 0.65 (including the origination fee) for loans with a 20% decline in payment. While the weekly average didn’t change much, the daily moves were more dramatic.

Another reading from Mortgage News Daily early last week showed the average rate on the 30-year fixed at 45 basis points, then falling 41 basis points on Thursday and then up 36 basis points again. Mortgage interest rates do not often move in such large steps.

An “Open House” sign at the Saratoga Homes Glendale Lakes community development in Arcola, Texas, on Tuesday, July 12, 2022.

Mark Felix | Bloomberg | Getty Images

That volatility probably contributed to refinancing earnings, which have been declining steadily since the beginning of this year. Those applications were up 4% for the week. Some may have quickly benefited from the drop in rates or were still hoping for the lower supply from previous weeks. However, the refinancing is still 82% lower than a year ago, when interest rates were around 3%.

Home purchase mortgage applications, which are less responsive to weekly interest rate movements, were down 1% for the week and 19% from a year ago.

“The procurement market continues to experience a slowdown despite the strong labor market,” said Joel Kan, MBA’s associate vice president of economic and industrial forecasting. “Activity has now slowed in five of the past six weeks as buyers sit on the sidelines amid still challenging affordability conditions and doubts about the strength of the economy.”

Mortgage rates fell slightly to start this week and were much less volatile than last week. That could change on Wednesday with the release of the latest consumer price index, which measures inflation in the economy. The bond market follows perhaps the closest of all economic indicators.

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