Homeowners Are Rushing to Refinance Amidst Those Soaring Rates

The latest data from the Mortgage Bankers Association (MBA) reflects that mortgage application volume actually squeaked out a slight 0.1% increase on a seasonally adjusted basis last week, despite conforming 30-year fixed mortgage rates topping the 7% threshold.

The driving factor behind this modest gain was thanks to a whopping 10% spike in refinance activity, which now accounts for 33.3% of total mortgage applications. This was up from 30.3% the prior week. The bad news is that purchase mortgage applications declined 5% on a seasonally adjusted basis and are down 23% compared to the same period last year. Seems like those higher rates are really starting to put a damper on homebuyer demand.

The MBA's economists point the finger at the Fed saying that the recent tough talk from central bank officials, coupled with unexpectedly strong job numbers, have added even more upward pressure on mortgage rates. The average 30-year fixed is now sitting at 7.37%, the highest we've seen in over a month.

The rising rate environment appears to be impacting homebuyer behavior, as evidenced by a decline in the average purchase loan size, which fell to $449,400 from $453,000 the previous week. Looks like buyers might be getting a bit more cautious and it’s tough to blame them.

The report also noted an increase in the share of FHA and VA loan applications, while the adjustable-rate mortgage (ARM) segment lost some ground. Some homeowners could be looking to lock in a rate before things get even crazier.

The latest mortgage market data paints a picture of a divided landscape, with refinancing activity surging amid the rate hikes, while purchase demand continues to soften in the face of affordability challenges. An interesting time to be a homebuyer or refinancer out there. Gotta stay nimble, that's for sure!