Although interest rates were lower last week, many potential homebuyers were not interested in applying for a mortgage. The volume of mortgage applications rose just 0.4 percent last week compared to the previous week. Overall mortgage application volume is down 22 percent when compared to the same time last year, according to a report by CNBC who cites the Mortgage Bankers Association. Most of the drop off is due to a decline in home loan refinances and skyrocketing housing prices.
Interest rates have been low for the past decade, and many borrowers are unimpressed with the low-interest rate environment today. Additionally, home prices have increased to the point where many potential homebuyers cannot afford to buy a house, specifically in high-cost areas such as California and Hawaii.
Interest rates on a 30-year fixed-rate loan fell to a seasonally adjusted average of 4.17 percent, which is down from last week’s average of 4.22 percent. The averages were based on loans with principal balances of $424,100 or less with loan-to-value ratios of 80 percent. Experts do not expect the Federal Reserve to raise the target interest rate at its meeting next week.
The average rate of borrowers who refinanced their mortgages increased by 3 percent last week, but that figure is down by 41 percent compared to this same time last year. Housing experts point to the decrease in the available pool of borrowers ready to refinance as the biggest factor in the drop. Most borrowers refinanced last year when rates were hovering around 3 ½ percent.
The problem for many potential homebuyers is not interest rates, but the current lack of inventory and skyrocketing home prices. According to the National Association of Realtors, mortgage applications to buy a home fell 2 percent compared to last week. The application rate is at its lowest levels since May.