Homes for sale in Austin, TX on May 22, 2024.
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A sharp rise in mortgage rates in late December, taking a toll on mortgage demand, coincided with the housing market entering what is typically its slowest period of the year.
Total mortgage applications for the two weeks ending December 27, 2024 fell 21.9% from the previous week, according to the Mortgage Bankers Association’s Seasonally Adjusted Index. Additional adjustments have also been made to take into account the Christmas holidays. MBA releases two weeks of data after markets closed for the holidays.
During this period, the average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance of $766,550 or less increased from 6.89% to 6.97%, and points for conforming loans increased from 0.67 to 0.72, including the origination fee . Mortgage rates were lower than last year for much of 2024, but are now rising 21 basis points annually.
“Mortgage rates moved higher in the final week of 2024, with 30-year fixed-rate loans approaching 7%,” said Mike Fratantoni, chief economist at MBA. “Not surprisingly, rising rates have led to refinancing at a time when real estate activity has typically come to a standstill. and purchase applications both fell.”
Applications for refinancing home loans, the category most sensitive to interest rate fluctuations, fell 36% from two weeks ago. Still, they are 10% higher than the same period a year ago. The refinance share of mortgage activity fell to 39.4% of total applications from 44.3% the previous week.
Applications for home-buying mortgages fell 13% in two weeks and are down 17% from the same period a year ago. While December is typically the slowest month of the year for home sales, these numbers are seasonally adjusted and year-to-year comparisons show considerable weakness. Although there are more homes on the market now than at this time last year, Many of these homes have been vacant for monthsdue to high prices and higher interest rates.
Mortgage rates started this week above 7% for a 30-year fixed, according to a separate survey by Mortgage News Daily. Given that the holidays fall in the middle of the week this year, all of these numbers fluctuate significantly.
“There’s no way of knowing where the bond market will open on Thursday,” Matthew Graham, chief operating officer of Mortgage News Daily, wrote. “The last or first trading day of any year is likely to see some excess volatility/ Momentum, the reasons have nothing to do with normal motivations (economic data, news, policy changes).”
