Mortgage rates dropped to the lowest level since March last week, sparking swift demand in refinancing. Homebuyers, however, seemed unimpressed.
Applications to refinance a home loan jumped 15% last week, compared with the previous week, to the highest level since August 2022, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 37% higher than the same week one year ago when mortgage rates were exactly the same.
While the increase last week was large, it is coming off a very small base. Refinance demand is still more than 70% lower than it was in early 2020, before the Covid-19 pandemic hit.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.87% from 7.00%, with points dropping to 0.57 from 0.60 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower,� said Joel Kan, MBA’s vice president and deputy chief economist, in a release.
Applications for a mortgage to purchase a home fell 3% for the week and were 14% lower than the same week one year ago. Buyers today are facing a lean and pricey market, and now, with the expectation that rates could drop even more, they may be waiting on the sidelines for a better opportunity. More supply is slowly coming onto the market and sellers are starting to reduce prices, especially for homes that have been sitting on the market for a while.
Mortgage rates have not changed much to start this week, despite a stronger-than-expected report on retail sales.
