US home refinancing dives on highest mortgage rates since 2018

[WASHINGTON] A gauge of US home-refinance applications tumbled for a second straight week as the average rate on a 30-year fixed mortgage surged to the highest level since late 2018.

The Mortgage Bankers Association's (MBA) refinancing index slumped 14.9 per cent in the week ended Mar 25 to a 3-year low of 1295.1, the Washington-based group said on Wednesday (Mar 30). Over the last 2 weeks, the gauge has declined nearly 30 per cent.

The MBA said the average contract rate on a 30-year fixed mortgage jumped 30 basis points to 4.8 per cent, and is up nearly 1 percentage point since early February. The contract rate on a 15-year mortgage is now above 4 per cent for the first time since 2019.

"Mortgage rates jumped to their highest level in more than 3 years last week, as investors continue to price in the impact of a more restrictive monetary policy from the Federal Reserve," Mike Fratantoni, MBA chief economist, said in a statement.

One bright spot in the data was that the MBA's measure of purchase applications edged up, suggesting housing demand is so far holding up despite the jump in borrowing costs.

"This is particularly auspicious, as we are now in the beginning of the spring homebuying season, and those shopping for homes are struggling with not only higher and more volatile mortgage rates, but also an ongoing shortage of homes on the market," Fratantoni said.

The survey covers over 75 per cent of all US retail residential mortgage applications. BLOOMBERG