Mortgage interest rates fell for the third consecutive week, resulting in increased demand for refinances but failing to impress homebuyers. Total mortgage application volume rose by 1.9% compared to the previous week, with the average contract interest rate for 30-year fixed-rate mortgages decreasing to 7.01%. Applications to refinance a home loan rose by 7% for the week and were 21% higher than the same week last year, with VA refinances experiencing a double-digit increase for the third consecutive week.
Despite the drop in mortgage interest rates, applications for a mortgage to purchase a home fell by 1% for the week and were 11% lower than the same week one year ago. Higher mortgage rates have impacted affordability, but the low supply and stiff competition in today’s market continue to fuel bidding wars. The gap in rates from a year ago has been shrinking, with the majority of borrowers still having significantly lower rates than what is currently being offered, indicating that demand is still at relatively low levels.
Mortgage rates have remained relatively stable, with no significant movement expected following the release of the minutes from the Federal Reserve. The transparency of the Fed’s communication and frequent speeches from its members have made it difficult to predict any dramatic reactions in the market based on the minutes. This shift in market behavior marks a departure from previous instances where the minutes have prompted quick movements in rates.
The Mortgage Bankers Association’s vice president and deputy chief economist, Joel Kan, noted that the decrease in rates from recent highs prompted some borrowers to take action, resulting in increased applications for both conventional and government refinances. Despite the increase in demand for refinances, the current level remains below the historical average, indicating that many borrowers have yet to take advantage of the lower rates available.
Overall, the recent decline in mortgage interest rates has led to increased demand for refinances, with applications rising and rates approaching levels closer to a year ago. However, the impact on homebuyers has been less pronounced, with applications for home purchase loans falling and affordability concerns persisting. The combination of low supply and intense competition in today’s housing market continues to pose challenges for potential buyers, despite the relatively stable rates and market conditions.
