Current homeowners and potential homebuyers are responding to lower mortgage rates, albeit slowly.
Mortgage demand rose 2.8% last week, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That was the second straight week of gains.
After dropping sharply the previous week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained unchanged at 7.61% last week, with points decreasing to 0.67 from 0.69, including the origination fee, for loans with a 20% down payment.
“Although Treasury rates dipped midweek, mortgage rates were little changed on average through the week,” said Joel Kan, MBA’s vice president and deputy chief economist.
Still, applications to refinance a home loan increased 2% for the week and were 7% higher than the same week one year ago. Mortgage rates this month are not that much different from November of last year, so there is not a lot of new incentive to refinance. Most borrowers carry much lower interest rates due to the record low rates seen during the first few years of the Covid-19 pandemic.
Applications for a mortgage to purchase a home increased 3% from the previous week and were 12% lower than the same week a year ago. Lower rates may help a little, but still-rising home prices and the still-low supply of homes are bigger hurdles for today’s potential buyers.
“Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners,” added Kan.
Mortgage rates moved lower this week, due to a sharp bond market rally after the government’s monthly inflation report came in lower than analysts had predicted.