Homes under construction are seen among completed homes in a new development in Brambleton, Virginia, on August 14, 2024.
Andrew Caballero Reynolds | AFP | Getty Images
Mortgage rates fell for the third consecutive week last week, but the refinancing rush has taken a breather.
Mortgage refinance applications fell 15% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, but the number of applications was 90% higher than the same week a year ago, likely due to a 23% surge in demand over the past four weeks as mortgage rates fell.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.54% to 6.50%, and points for loans with a 20% down payment increased from 0.57 (including origination fees) to 0.60.
The 30-year fixed rate has fallen 32 basis points over the past four weeks and is 81 basis points lower than it was a year ago. One basis point is 0.01 percentage point.
“Both mortgage rates and mortgage applications have remained steady after several weeks of financial market volatility caused mortgage rates to plummet,” MBA economist Joel Kang said in a press release. “Another thing to note is that while rates are certainly lower, they are still at 6.5%, which is still not low for borrowers earning rates below 5%.”
After spending below 3% during the first two years of the COVID-19 pandemic, most borrowers are now paying well below 5%.
Mortgage applications to buy a home fell 5% this week and are 8% lower than the same week a year ago. Demand is now at its lowest level since February. Homebuyers have not been as affected by the recent decline in interest rates as they are still struggling to afford the few homes that are available for sale. Home prices continue to rise, albeit at a slower pace than in past years, but there is more supply of homes on the market.
“Even with low mortgage rates, potential buyers may be more selective in their selection of properties now that there are more options available,” Kang added.
A separate survey from Mortgage News Daily showed mortgage rates have fallen further since the beginning of the week.
“The lowest rates in just over two weeks may seem worthy of more enthusiasm, but it doesn’t tell us anything about current trends that we didn’t know yesterday,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. “Simply put, rates were volatile earlier this month and have remained gradual and largely stable since then while we wait for more compelling incentives.”
