While applications for mortgages to buy a home rose week to week, they were still down more than 20% compared to a year earlier.
Sales of newly built homes in May soared 12% compared with April and were 20% higher than May 2022,Tuesday from the U.S. Census. Builders are driving demand in part by offering incentives, like paying down mortgage rates.
Last week the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.75% from 6.73%, with points remaining at 0.64 for loans with a 20% down payment. The average rate for 30-year fixed-rate mortgages with jumbo loan balances rose more sharply to 6.91% from 6.80%.
"The spread between the jumbo and conforming rates widened to 16 basis points, the third week in a row that the jumbo rate was higher than the conforming rate," Kan said. "To put this into perspective, from May 2022 to May 2023, the jumbo rate averaged around 30 basis points less than the conforming rate."
The widening spread and the increase in the jumbo rate stem from the recent regional bank failures. Lenders hold jumbo loans on their balance sheets, because Fannie Mae and Freddie Mac don't buy loans of that size. Bank credit, especially at community banks, has tightened substantially, resulting in higher rates.
Applications to refinance a home loan rose 3% for the week but were 32% lower than the same week one year ago. The vast majority of borrowers today have mortgages with interest rates below 4%.
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