LARKSPURR, Calif. – NOVEMBER 30, 2023: A sign is posted in front of a home for sale in Larkspur, Calif., on November 30, 2023. Pending home sales fell 1.5 percent in October, the lowest level in 20 years, according to a report from the National Association of Realtors. (Photo by Justin Sullivan/Getty Images)
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Mortgage rates fell for the sixth straight week last week, but demand for mortgages still appears to be waiting for a bigger drop.
According to the Mortgage Bankers Association, the average contract rate for a 30-year fixed-rate mortgage with a qualifying loan balance ($766,550 or less) decreased from 6.43% to 6.29%, and the point rate for a 20% down payment loan decreased from 0.56 to 0.55 (including the origination fee). This is the lowest level since February 2023 and nearly a percentage point lower than the same week a year ago.
“Treasury yields are responding to data showing slowing inflation, a weak jobs market and expectations that the Fed will cut rates for the first time later this month,” said Joel Kahn, MBA vice president and deputy chief economist.
But total mortgage demand rose just 1.4% this week, according to the MBA’s seasonally adjusted index, which also includes adjustments for the Labor Day holiday.
Refinance applications rose just 1% per week, but that’s a whopping 106% more than a year ago. That may sound like a huge increase, but the numbers were so small last year that even with that big increase, refinancing is still at historically low levels.
“With many borrowers still stuck with rates below 5%, the availability of refinancing options is somewhat limited. It’s a positive development that there are homeowners who can benefit from refinancing as rates continue to fall,” Khan added.
Most people refinancing likely purchased a home in the past two years, when interest rates were at historic lows.
Mortgage applications for home purchases rose 2% this week, but were down 3% from the same week a year ago.
“Despite the price declines, other factors such as affordability issues and inventory shortages can still hinder purchasing decisions,” Khan said.
A separate survey by Mortgage News Daily found that mortgage rates have been trending lower since the beginning of the week, but the Consumer Price Index, a gauge of inflation due out Wednesday, could have a bigger impact on the direction of rates.
“If it weren’t for the fact that this was one of the only big reports coming out during the blackout period leading up to the Fed rate cut, and the size of that cut being a matter of debate, we would confidently say that the CPI is almost completely unimportant. But because of all that “stuff,” we can’t rule out a volatile reaction to a big selloff/failure,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.
