Last week, mortgage interest rates dropped for the third consecutive week, prompting an increase in demand for refinancing. However, while refinances saw a boost, homebuyers did not seem to be as enthusiastic. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume rose by 1.9% compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less decreased to 7.01% from 7.08%, with points declining to 0.60 from 0.63, including the origination fee, for loans with a 20% down payment.
Applications for refinancing a home loan increased by 7% for the week and were 21% higher than they were a year ago. Even though rates from last week were just 32 basis points higher than they were a year ago, the gap has been shrinking. Despite this decrease, the majority of borrowers today have rates significantly lower than current ones offered. Consequently, demand for refinancing remains at a relatively low level. Joel Kan, MBA’s vice president and deputy chief economist, noted that the drop in rates from recent highs prompted some borrowers to take action, resulting in increases across both conventional and government refinance applications. VA refinances also saw a double-digit increase for the third week in a row, although their current level remains below the historical average.
Conversely, applications for mortgages to purchase homes fell by 1% for the week and were 11% lower compared to the same week a year ago. Despite relatively low mortgage rates, affordability has been impacted by the lack of supply and intense competition, leading to bidding wars among buyers. As a result, the decrease in mortgage applications for home purchases reflects the challenges faced by prospective buyers in the current market. Mortgage rates have remained relatively stable this week, and there is little anticipation of a significant reaction following the release of the Federal Reserve’s minutes on Wednesday.
Matthew Graham, chief operating officer at Mortgage News Daily, highlighted the high level of transparency and frequent speeches from Fed members, indicating that the minutes are unlikely to cause any significant fluctuations in rates. This contrasts with past instances where the minutes influenced sudden changes in rates. The expectation of minimal impact from the minutes reflects a shift in market dynamics and a more stable environment for mortgage rates. Ultimately, the consistency in mortgage rates and the lack of drama surrounding the release of the Fed’s minutes suggest a relatively calm period for the mortgage market.
