Last week, mortgage rates declined for the fourth consecutive week. Surprisingly, the response from both current homeowners and potential homebuyers was lackluster. Despite the decrease in mortgage rates, the total mortgage application volume only saw a slight increase of 0.5% compared to the previous week, as reported by the Mortgage Bankers Association.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dropped to 6.44% from 6.50%. Points also decreased to 0.54 from 0.60, including the origination fee, for loans with a 20% down payment. This reduction marked the lowest rate recorded since April 2023, with rates plummeting more than 80 basis points from a year ago.
Surprisingly, despite the favorable rate environment, demand for refinancing decreased by 0.1% from the previous week. However, it was notably 85% higher than the same week one year ago. The main issue lies in the fact that most borrowers currently have mortgages with rates significantly lower than 6%. Therefore, the cost of refinancing only becomes justifiable if the new rate can shave off at least 75 basis points from the current rate.
On a more positive note, applications for mortgages to purchase homes rose by 1% for the week. Nevertheless, they were 9% lower compared to the same week last year. Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, commented on this trend, noting that despite the allure of lower rates, prospective homebuyers are exercising patience due to the gradual increase in for-sale inventory.
At the beginning of this week, mortgage rates remained relatively unchanged, with no significant economic data fueling any substantial shifts. The stagnation in rates raises questions about the potential trajectory of the housing market in the coming months and whether further rate reductions will be sufficient to stimulate greater activity among homebuyers.
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