Two negative impacts hit homebuyers last week: interest rates and winter weather. Mortgage interest rates have been on a slow but steady increase ever since the beginning of the year, but last week they jumped up to 2.97%, a full 15 basis points higher than the week before, according to the Freddie Mac weekly report.
This combined with severe winter weather across large sections of the country meant applications decreased significantly, with purchase applications dropping 12% over the week on a seasonally adjusted basis, based on the Mortgage Bankers Association weekly survey. This was 7% higher than one year earlier, so low interest rates are still a lure for buyers but the gap is closing on how many more people are applying for a mortgage this year compared to last.
Refinance applications also saw a big dip, of 10% week-over-week, which was 50% higher than a year ago. Refinances are also steadily dropping as interest rates reverse course from the record lows seen during 2020. “Refinance activity fell…to its lowest level since December 2020,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
A heavyweight influencing the data was the huge drop in activity in Texas—one of the states hardest hit by winter storms. Applications dropped 40% compared to the week before.
That big a decrease is surely just a temporary blip since demand is rising in most of the major metropolitan areas of the state. But anyone hoping to purchase a home this year, no matter which state they live in should try to do so as soon as possible. Interest rates are going to get back over 3% very soon and will continue to increase after that.