An aerial photo shows subdivisions replacing the once rural fields of Hawthorn Woods, Illinois.
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Mortgage rates fell to their lowest levels since May 2023 last week, sparking a surge in mortgage demand from both home buyers and especially current homeowners.
Total mortgage applications rose 6.9% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, bringing the number of applications to the highest level since January.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.82% to 6.55%, and the points for loans with a 20% down payment decreased from 0.62 (including origination fees) to 0.58.
“Mortgage rates fell across the board last week following dovish comments from the Federal Reserve and weak employment data, raising concerns that the economy will slow more quickly than expected,” Joel Kang, MBA vice dean and associate chief economist, said in a statement.
Mortgage refinance applications, which are most sensitive to week-to-week interest rate fluctuations, increased 16% this week and are 59% higher than the same week a year ago. While the increase is large, it is still from a very small base. The majority of borrowers currently have loans with interest rates below 5%. Fewer than 1 million borrowers could benefit from refinancing and reduce their current interest rate by at least 75 basis points.
Mortgage applications for home purchases increased just 1% this week, but are still 11% lower than the same week a year ago.
“Despite lower interest rates, purchasing activity only increased slightly, with an increase in traditional purchase applications offset by a decrease in government purchase applications. Active inventory has started to gradually increase in some parts of the country, and homebuyers may be waiting for the right time to enter the market given the prospect of lower interest rates,” Kang added.
Mortgage rates fell further earlier this week following Monday’s stock market crash, but spiked again on Tuesday after more positive economic data came out.
“Things often play out this way when bond markets force a sudden, sharp move to higher interest rates. For example, some of the biggest daily declines in mortgage rates have occurred after sharp moves to long-term highs,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.
