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Homebuyer demand for purchase loans picked up last week before a big sell-off in bond markets sent mortgage rates soaring to new heights, according to a weekly survey of lenders by the Mortgage Bankers Association.

The MBA’s Weekly Mortgage Applications Survey showed demand for purchase mortgages rose by seasonally adjusted 8 percent last week when compared to the week before. But compared to the same time a year ago, there was a double-digit drop in purchase loan applications.

Joel Kan

“Purchase applications were down more than 15 percent compared to last year, as ongoing inventory shortages and affordability challenges have cooled demand, coinciding with the rapid jump in mortgage rates,” said MBA forecaster Joel Kan, in a statement.

Demand for refinancing also picked up by 4 percent from week-to-week, but refi applications are down by 76 percent compared to a year ago, accounting for 31.7 percent of total applications. Requests for adjustable-rate mortgage (ARM) loans accounted for 8.1 percent of mortgage applications.

Mortgage rates surge past 6%

According to the Optimal Blue Mortgage Market Indices, rates on 30-year fixed-rate mortgages have increased by nearly 3 full percentage points in the last year, rising from 3.161 percent on June 15, 2021, to 6.056 percent on Tuesday.

In the last two weeks alone, rates have soared by 79 basis points. A basis point is one-hundredth of a percent, so mortgage rates have increased by nearly eight-tenths of a percentage point in the last two weeks.

Half of that increase has taken place since Friday, when the Labor Department released statistics showing the U.S. experienced the highest rate of inflation in more than 40 years during May. That report sparked a sell-off in bond markets on Friday and Monday, as investors fretted that the Federal Reserve will implement a drastic 75-basis point rate hike in June or July to combat inflation, which hit 8.6 percent in May.

For the week ending June 10, the MBA reported average rates for the following types of loans:

• For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less), rates averaged 5.65 percent, up from 5.40 percent the week before. With points increasing to 0.71 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
• Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 5.25 percent, up from 4.99 percent the week before. With points increasing to 0.54 from 0.44 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 30-year fixed-rate FHA mortgages, rates averaged 5.36 percent, up from 5.30 percent the week before. With points increasing to 1.00 from 0.79 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• Rates for 15-year fixed-rate mortgages averaged 4.79 percent, up from 4.62 percent the week before. With points increasing to 0.80 from 0.65 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 5/1 ARM loans, rates averaged 4.57 percent, up from 4.51 percent the week before. With points increasing to 0.8 from 0.68 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

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Email Matt Carter