Mortgage rates increased seven basis points last week, effectively putting us back where we were two weeks ago, according to the Freddie Mac Primary Mortgage Market Survey released on April 30th. As rates have modestly declined in the last few weeks, purchase demand has accelerated with purchase applications rising to over 20 percent above a year ago. Purchase demand continues to hold up as prospective buyers react to both modestly lower rates than in the same period last year and more inventory to choose from than in the last few years.
Mortgage applications decreased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 24th. “Mortgage rates increased slightly last week. The increase in rates led to a 4 percent decline in refinance application volume. However, purchase activity for conventional loans picked up almost 2 percent for the week,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “More notably, purchase application activity was more than 20 percent above last year’s pace. After a brief pause, in part because of the elevated geopolitical uncertainties, potential homebuyers certainly appear to be moving forward this spring and taking advantage of the more favorable inventory conditions in most parts of the country.”
An unusually divided Federal Reserve on Wednesday held its key interest rate steady as policymakers grappled with the policy impact of persistent inflation and awaited a looming leadership transition at the central bank. In what may have been Chair Jerome Powell’s final meeting at the helm, the rate-setting Federal Open Market Committee voted to hold the benchmark funds rate in a range between 3.5%-3.75%. Markets had been pricing in a 100% chance of no change. However, the meeting saw a dramatic turn amid a groundswell of officials who opposed messaging that further rate cuts could be ahead. Amid expectations for a routine vote to hold the benchmark funds rate steady, the FOMC instead was split along 8-4 lines, with officials expressing different reasons for their vote. The last time four FOMC members dissented was in October 1992.
The recent gas price spikes have driven the University of Michigan’s Index of Consumer Sentiment to the lowest level recorded in its 73-year history. The index declined by 3.5 points in April, dropping to 49.8, amid the rising prices caused by the Iran war, according to the Surveys of Consumers’ results for April. “The Iran conflict appears to influence consumer views primarily through shocks to gasoline and potentially other prices,” Surveys of Consumers Director Joanne Hsu said in the report. “In contrast, military and diplomatic developments that do not lift supply constraints or lower energy prices are unlikely to buoy consumers.” The connection between the price of gas and consumer sentiment was seen earlier in April, when a softening of gas prices caused by the announcement of a two-week ceasefire was followed by a modest improvement in consumer sentiment, according to the report. April’s decline in consumer sentiment was seen across political affiliation, income, age and education, per the report.
