After making their largest leap in 26 years the week before, long-term mortgage interest rates retreated last week as mortgage demand dampened.
The average interest rate on a 30-year fixed-rate, conventional mortgage fell to 4.29 percent, excluding points during the week ended July 3, according to Freddie Mac, from 4.46 percent the previous week. The rate was still up significantly from a year ago when it averaged 3.62 percent.
The 15-year fixed rate mortgage also took a rate hit, with the average dropping to 3.39 percent, down from 3.50 percent a week earlier, but up from the previous year when it averaged 2.89 percent. The one-year adjustable rate mortgage carried a rate of 2.66 percent, unchanged from the week before but down from the same time last year when it was 2.68 percent.
“Fixed mortgage rates fell over the holiday week as market concerns over the timing of the Federal Reserve’s pullback in bond purchases eased somewhat,” said Freddie Mac vice president and chief economist Frank Nothaft in a statement. “Rates are still low by historical standards and should continue to aid in housing affordability and the ongoing recovery of the housing market.”
At the same time, home loan volume shrank in response to the previous week’s rate hike. Total loan applications fell by 11.7 percent during the week ended July 3, aaccording to the Mortgage Bankers Association.
“Mortgage rates reached their highest point in two years last week. At these rates, many fewer homeowners have an incentive to refinance, and refinance application volume declined more than 15 percent,” said Mike Fratantoni, MBA’s Vice President of Research and Economic in a statement. “With this decline in volume, the refinance share dropped to its lowest level in more than two years. Purchase application volume also declined, but not nearly to the same extent, as affordability remains strong.”
Rates are on track to continue to climb gradually, which means the refinance share of loans will keep contracting, but home purchases will hopefully increase as buyers rush to lock in historically low rates before they are gone for good.