In a promising turn of events, the demand for mortgages is on the rise, buoyed by the continuous decline in interest rates.
According to the Mortgage Bankers Association's seasonally adjusted index, total application volume increased by 3% last week compared to the previous week. Notably, the average contract interest rate for 30-year fixed-rate mortgages, applicable to conforming loan balances of $726,200 or less, saw a decline from 7.61% to 7.41%. Additionally, the associated points decreased from 0.67 to 0.62, including the origination fee, for loans requiring a 20% down payment.
Joel Kan, MBA’s deputy chief economist, attributed this shift to decreasing U.S. bond yields, driven by signs of a softer economy and cooling inflation. Kan highlighted that despite the increase, mortgage applications are still at notably low levels.
Refinancing applications exhibited a 2% increase for the week, showing only a 4% decrease compared to the same period last year. Although current rates are 75 basis points higher than a year ago, they remain substantially lower than the rates during the previous refinancing boom two years ago.
Applications for mortgages to purchase homes rose by 4% on a weekly basis. However, this surge is tempered by the fact that it is still 20% lower than the previous year. Kan mentioned that the average loan size on a purchase application hit $403,600, the lowest since January 2023, indicative of a gradually increasing share of first-time homebuyers.
Despite the uptick in mortgage demand, the housing market remains fragile, as October sales of existing homes hit a 13-year low, as reported by the National Association of Realtors. While mortgage rates experienced a slight decrease recently, analysts are cautious about predicting any significant shifts in the near future. Matthew Graham, the chief operating officer of Mortgage News Daily, noted the market's shift into holiday mode, marked by light volume and liquidity, potentially leading to random volatility without fundamental justification.
Find the Original Article Here: https://www.cnbc.com/2023/11/22/mortgage-demand-jumps-to-six-week-high-as-interest-rates-continue-to-drop.html