Source: Zhitong Finance
For the week ending April 5, interest rates on 30-year fixed mortgage contracts in the US rose 10 basis points to 7.01%, for the first time in a month.
According to data from the American Mortgage Bankers Association (MBA), interest rates on 30-year fixed mortgage contracts in the US rose 10 basis points to 7.01% in the week ending April 5, for the first time in a month. This led to a 4.7% drop in the home purchase mortgage application index announced by the Association, reaching its lowest level in a month. Despite this, the home loan refinancing index increased by 10%.
According to information, overall mortgage demand in the US has been fluctuating sideways for three consecutive weeks, but last week there were differences between buyers and those hoping to save money through refinancing.
Among them, the number of applications for refinancing housing loans increased by 10% in one week, 4% higher than in the same period last year. Normally, rising interest rates cause refinancing demand to fall, but since interest rates fell slightly in previous weeks, some homeowners may have been waiting for interest rates to drop further. And when interest rates rose last week, they may be worried that interest rates will rise further, so hurry up and apply for possible savings.
Furthermore, the number of applications for home purchase loans fell by 5%, a decrease of 23% compared to the same period last year. The spring real estate market is in full swing, and although today's housing inventory has increased slightly, it is still far below what should be in a situation of high demand. Housing prices also showed no signs of cooling down.
MBA Deputy Chief Economist Joel Cann said, “Last week, mortgage interest rates increased as several Federal Reserve Bank officials reiterated their patience with interest rate cuts. Inflation is still far above the Federal Reserve's target, while the overall economy continues to show resilience. The unexpectedly strong employment data released last week further increased the upward pressure on interest rates.”
It is worth mentioning that as the latest CPI data showed that the inflation rate was higher than expected, attention was drawn to continued inflation and the corresponding monetary policy response. According to the data, the unseasonally adjusted US CPI increased 3.5% year on year in March, higher than the expected level of 3.4%, the highest level since September 2023. After the US CPI data was released, Treasury yields soared, and the 10-year US Treasury yield rose above 4.5%.
Long-term mortgage interest rates tend to follow the risk-free yield benchmark — the 10-year US Treasury yield, so when individual or institutional investors see or expect the benchmark interest rate to rise, and when they expect interest rates to remain at historically high levels for a long time, their actions tend to push up the benchmark yield, which in turn heats up, and vice versa.