Mortgage rates witnessed their most substantial one-week decline in over a year, leading to the first uptick in mortgage demand in a month. The Mortgage Bankers Association‘s seasonally adjusted index reported a 2.5% increase in total mortgage application volume last week compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages, with conforming loan balances of $726,200 or less, fell from 7.86% to 7.61%. Points, including the origination fee, dropped from 0.73 to 0.69 for loans with a 20% down payment. Joel Kan, the vice president and deputy chief economist at the MBA, attributed the rate decline to factors such as the U.S. Treasury’s issuance update, a dovish tone from the Federal Reserve in the November FOMC statement, and indications of a slower job market.
Refinance applications rose by 2% for the week, showing a 7% decrease from the same period last year. However, the current mortgage rates, close to those of the previous year, offer limited incentives for refinancing, especially for homeowners who refinanced when rates were at record lows two years ago. Applications for home purchase mortgages increased by 3% for the week but remained 20% lower than the corresponding week in the previous year. Despite the decline in interest rates, soaring home prices persist due to the severe shortage of houses for sale, deterring many potential buyers.
Although mortgage rates began the current week with a slight increase, the absence of significant economic events or reports that could influence rates is anticipated. The prior week’s combination of the Federal Reserve maintaining interest rates and a monthly employment report below expectations contributed to the substantial rate decrease.