Weekly mortgage demand increases, driven by a strange surge in refinancing

by anastasiakaufman-chime-me

PUBLISHED WED, SEP 20 20237:00 AM EDTUPDATED WED, SEP 20 20238:23 AM EDT

A for sale sign in front of a home in Arlington, Virginia, on August 22, 2023. Sales of homes in the United States ticked down in July, according to industry data released on August 22, 2023, as elevated mortgage rates and limited housing supply held buyers back. The housing market in the world's biggest economy has been reeling as interest rates climbed, making home owners reluctant to put their properties up for sale -- having earlier locked in lower rates on their mortgages. (Photo by Andrew Caballero-Re — A for sale sign in front of a home in Arlington, Virginia, on August 22, 2023.Andrew Caballero-Reynolds | AFP | Getty Images

Mortgage rates rose again last week, and so did demand for refinances, which at face value doesn’t make a lot of sense.

Applications to refinance a home loan jumped 13% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Application volume was still 29% lower than the same week one year ago.

Refinancing demand usually moves in the opposite direction as mortgage rates, but that was not the case. Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.31% from 7.27%, with points remaining unchanged from 0.72 (including the origination fee) for loans with a 20% down payment.

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