Demand for mortgages surges over the past week amid bank closures
Mar 16, 2023
By   Aarthi Swaminathan
  • City News
  • Mortgages
  • falling interest rates
  • MBA
Abstract: Demand for mortgages has risen over the past week despite news of bank closures and an uncertain economic outlook.

Demand for mortgages rose by 6.5% in the latest week as interest rates fell slightly.


Demand for both purchases and refinancing is on the rise. The Mortgage Bankers Association (MBA) said on Wednesday that this drove the Market Composite Index - a measure of mortgage application volumes - up.


For the week ending March 10, the market index rose 6.5 per cent from a week earlier to 214.5. a year ago, the index stood at 496.5.

Key details. The refinancing index was up 4.8%, but down 74% compared to a year ago.


The purchase index - which measures mortgage applications to purchase a home - increased by 7.3 per cent from last week.


The average contract rate for a 30-year mortgage on a home priced at $726,200 or less was 6.71 per cent for the week ending March 10.


This was down from 6.79 per cent the previous week, the MBA said.


For homes priced above $726,200, the average 30-year rate was 6.39 per cent, down from 6.49 per cent the previous week.


The 15-year rate fell to 6.14 per cent from 6.25 per cent the previous week.


Rates on adjustable rate mortgages fell to 5.69 per cent from 5.75 per cent last week.


The big picture. Bank failures and widespread uncertainty about the future of the US economy are driving investors into Treasuries, which in turn is driving mortgage rates down.


Homebuyers may see this as welcome news, but the same uncertainty may also cause some to delay home purchases amid concerns about job security or financial stability.


What the MBA says." Joel Kan, MBA vice-chairman and deputy chief economist, said, "While lower interest rates should boost housing demand, volatility in the financial markets could cause buyers to pause in their decision.


"Falling rates did bring back some [refinancing] borrowers," he added, "as evidenced by a 5 per cent increase in refinancing applications last week."


The market reacted. the yield on the 10-year Treasury note was below 3.55 per cent in early trading on Wednesday.