LARKSPUR, CA – NOVEMBER 30: A sign is posted in front of a home for sale on November 30, 2023 in Larkspur, California. Pending home sales fell 1.5% in October to their lowest level in 20 years, according to the National Association of Realtors. (Photo by Justin Sullivan/Getty Images)
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Mortgage rates fell for a sixth consecutive week last week, but mortgage demand still appears to be awaiting bigger changes.
The average contract interest rate for a 30-year fixed-rate mortgage with qualifying loan balance ($766,550 or less) fell from 6.43% to 6.29%, and points for loans with a 20% down payment fell from 0.56 (including origination fee) to 0.55, according to Mortgage Bank home association’s statement. That’s the lowest level since February 2023 and nearly a percentage point lower than the same week a year ago.
“Treasury yields have been reacting to data showing cooling inflation, a slowing job market and expectations for the Federal Reserve’s first interest rate cut later this month,” said Joel Kan, MBA vice president and deputy chief economist.
However, total mortgage demand increased only 1.4% this week, according to the MBA Seasonally Adjusted Index. The results also include adjustments for the Labor Day holiday.
Refinancing applications are up just 1% weekly, but are up 106% from a year ago. That may sound like a huge increase, but last year’s numbers were so low that even with such a big gain, refinancing is still at an all-time low.
“Refinancing potential remains limited as interest rates for many borrowers remain below 5%. As interest rates continue to move lower, homeowners can benefit from refinancing, which is a positive development,” Kan added.
Most people who are refinancing likely purchased their homes in the past two years, when interest rates have risen significantly from historic lows.
Mortgage applications for home purchases increased 2% this week, but were down 3% from the same week a year ago.
“Despite falling interest rates, other factors such as affordability challenges and limited inventory may still hinder purchasing decisions,” Kan said.
Mortgage rates continue to move lower to start the week, but Wednesday’s release of the monthly Consumer Price Index, a measure of inflation, could have a more dramatic impact on the direction of rates, according to a separate Mortgage News Daily survey .
“Were it not for the fact that this was one of the only big reports released during the lockdown period before the Fed cut interest rates, the extent of which is a contentious issue, we would confidently say that CPI was almost completely Doesn’t matter.
Correction: This article has been updated to correct that mortgage rates hit their lowest levels since February 2023.
