Lower mortgage rates are getting a response from both existing and prospective homeowners, if slowly.
The seasonally adjusted index published by the Mortgage Bankers Association shows that mortgage demand increased 2.8% last week over the previous week. That marked the second week in a row of gains.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less was 7.61% last week, unchanged from the previous week’s sharp decline. For loans with a 20% down payment, points dropped to 0.67 from 0.69, including the origination fee.
According to Joel Kan, vice president and deputy chief economist at MBA, “mortgage rates were little changed on average throughout the week, although Treasury rates dipped midweek.”
Nevertheless, applications to refinance home loans rose by 2% over the course of the week and by 7% over the corresponding period in the previous year. There is not a lot of new motivation to refinance because mortgage rates this month are not all that different from those in November of last year. Because of the record-low interest rates that were seen in the early years of the Covid-19 pandemic, the majority of borrowers have much lower interest rates.
Mortgage applications for home purchases rose by 3% from the previous week and decreased by 12% from the corresponding week of last year. Although lower rates might be somewhat helpful, today’s prospective buyers face greater obstacles from steadily rising home prices and a scarcity of available properties.
Applications for both purchases and refinances rose to their highest weekly rate in five weeks, but they are still very low. Mortgage rates are still difficult for many current homeowners and prospective homebuyers, even with the recent downward trend, Kan continued.
This week’s sharp rally in the bond market, which followed the government’s lower-than-expected monthly inflation report, resulted in a decrease in mortgage rates.
