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Mortgage rates fell last week to their lowest levels since March, triggering rapid demand for refinancing. Homebuyers, however, appear unmoved.
Applications for home loan refinancing rose 15% last week from the previous week to the highest level since August 2022, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand is up 37% compared to the same week a year ago when mortgage rates were exactly the same.
Although the increase last week was large, it was from a small base. Refinancing demand remains more than 70% lower than at the start of 2020, before the Covid-19 pandemic hit.
The average contract interest rate for a 30-year fixed-rate mortgage with qualifying loan balance ($766,550 or less) dropped from 7.00% to 6.87%, and the payment for loans with 20% down dropped from 0.60 (including origination fee) to 0.57%.
“Mortgage rates fell last week on recent signs of cooling inflation and the prospect of the Federal Reserve later this year,” Joel Kan, MBA vice president and deputy chief economist, said in a news release. The likelihood of a rate cut increases, causing mortgage rates to fall.
Mortgage applications for home purchases fell 3% this week and were down 14% from the same week a year ago. Buyers today face a thin and expensive market, and now, with expectations that interest rates may fall further, they may wait on the sidelines for better opportunities. More supply is slowly coming to the market and sellers are starting to lower their prices, especially on homes that have been on the market for a while.
Mortgage rates started the week without much change despite a stronger-than-expected retail sales report.
