LARKSPUR, CALIFORNIA – 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 percent in October to the lowest level in 20 years, according to a report by the National Association of Realtors. (Photo by Justin Sullivan/Getty Images)
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Mortgage rates fell for a sixth week in a row last week, but mortgage demand appears to still be waiting for something bigger.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell to 6.29% from 6.43%, with units falling to 0.55 from 0.56 (including fee origin) for loans with a 20% reduction. payment, according to the Mortgage Bankers Association. That’s the lowest level since February 2023 and nearly a full percentage point lower than the same week a year ago.
“Bond yields are responding to data that shows a picture of lower inflation, a slowing labor market and the expected first rate cut by the Federal Reserve later this month,” said Joel Kan, vice president and deputy chief economist at MBA.
Overall mortgage demand, however, rose just 1.4% for the week, according to the MBA’s seasonally adjusted index. The results also included an adjustment for the Labor Day holiday.
Refinance applications were up just 1% week-on-week, but were 106% higher than a year ago. That may sound like a huge increase, but the numbers were so low last year that even with this big gain, refinancing is still historically low.
“There is still somewhat limited refinance potential as many borrowers still have interest rates below 5%. It is a positive development that there are homeowners who can benefit from a refinance as interest rates continue to move lower,” Kan added.
Most of those refinancing likely bought their homes in the past two years, when interest rates had moved well above record lows.
Home mortgage applications rose 2% for the week, but were 3% lower than the same week a year ago.
“Despite falling interest rates, affordability challenges and other factors such as limited inventory may still hinder purchasing decisions,” Kan said.
Mortgage rates continued to move lower to start this week, according to a separate survey by Mortgage News Daily, but Wednesday’s monthly release of the consumer price index, a measure of inflation, could weigh on the direction of rates. more strongly in any direction.
“If it weren’t for the fact that this is one of the only ticket reports published in the blackout period leading to a Fed rate cut, where the size of said cut is up for debate, we’d say with confidence that the CPI is almost completely insignificant, but because of all these ‘things,’ we can’t rule out a volatile response to a big beat/miss,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
Correction: This story has been updated to correct that mortgage rates hit their lowest level since February 2023. An earlier edition’s headline misstated the year.
