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The recent surge in home prices, which are more than 40% above pre-pandemic levels, should have prompted existing homeowners to rush to refinance their loans. But for most, pulling out that money is now prohibitively expensive, with interest rates more than double what they were just two years ago.
Applications for home refinancing fell for the fourth straight week last week, down 2%, according to the Mortgage Bankers Association’s seasonally adjusted index. Last week’s results included an adjustment for the Fourth of July holiday. Demand is still 28% higher than it was a year ago, when rates were 7 basis points higher.
According to CoreLogic, homeowners owned $17 trillion in equity at the end of the first quarter of 2024. In just one year, homeowners gained $1.5 trillion, or $28,000 per borrower.
“Although home equity gains have been significant in recent years, most borrowers have little incentive to refinance at current rates,” Joel Kahn, a business economist, said in a statement.
The average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell last week to 7.00% from 7.03%, with points falling to 0.60 from 0.62 (including origination fees) for loans with a 20% down payment.
Applications for a home loan rose 1% during the week, but were 13% lower than the same week a year ago.
“Purchasing activity rebounded slightly, driven primarily by increases in FHA and VA applications,” Kahn added.
Mortgage rates haven’t moved at all so far this week, despite Federal Reserve Chairman Jerome Powell’s testimony before Congress on Tuesday. That’s likely to change with new economic data due on Thursday with the latest CPI reading.
“Fed Chair Powell repeated the same messages that many Fed spokesmen have heard,” wrote Matthew Graham, chief operating officer of Mortgage News Daily. “After the CPI release, [rate] Movement is almost guaranteed, for better or worse.