Last week saw the largest one-week decline in mortgage rates in more than a year, which led to the first increase in mortgage demand in a month.
In comparison to the prior week, the total number of mortgage applications increased by 2.5% last week, as per the seasonally adjusted index released by the Mortgage Bankers Association.
For 30-year fixed-rate mortgages with conforming loan balances of $726,200 or less, the average contract interest rate dropped from 7.86% to 7.61%. For loans requiring a 20% down payment, the points decreased from 0.73 to 0.69 (inclusive of the origination fee).
Joel Kan, vice president and deputy chief economist at the MBA, stated that the U.S. Treasury’s issuance update, the Fed’s dovish tone in the November FOMC statement, and data showing a slower job market were the main factors behind last week’s rate decrease.
Refinancing applications rose by 2% during the week, but they were 7% fewer than they were a year ago. There isn’t many reasons to refinance because mortgage rates are currently quite similar to where they were this time last year. When interest rates were almost at all-time lows two years ago, the majority of homeowners refinanced. Most existing homeowners have mortgages with interest rates under 4%.
Mortgage applications for home purchases increased by 3% during the week, but they were 20% fewer than they were a year ago. Because there are so few homes available for purchase, the drop in interest rates is still insufficient to counteract the exorbitant prices of real estate.
Although there aren’t as many economic reports or events this week that could affect rates, mortgage rates did start the week somewhat higher. A lower-than-expected monthly employment report and the Federal Reserve’s decision to hold interest rates steady last week created the ideal conditions for the sharp decline in rates.
