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Mortgage rates fell to their lowest since March last week, spurring a surge in demand for refinancing, but homebuyers appear unimpressed.
Mortgage refinance applications rose 15% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, hitting the highest level since August 2022. Demand was up 37% compared to the same week a year ago, when mortgage rates were exactly the same.
Last week’s increase was large, but it came from a very small base: Refinance demand is still more than 70% lower than it was at the beginning of 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 from 7.00% to 6.87%, and points for loans with a 20% down payment decreased from 0.60 (including origination fees) to 0.57.
“Mortgage rates fell last week as recent signs of slowing inflation and the growing likelihood of a rate cut by the Fed later this year pushed rates lower,” Joel Kang, MBA vice president and deputy chief economist, said in a statement.
Mortgage applications to purchase a home fell 3% this week and are 14% lower than the same week a year ago. Today’s buyers are facing a scarce and expensive market and may be on the sidelines waiting for a better opportunity as they expect interest rates to fall further. There is gradually more supply on the market and sellers are starting to lower prices, especially on homes that have been on the market for a while.
Mortgage rates are little changed since the beginning of the week, despite stronger-than-expected retail sales figures.
