Rosalind Evans
Mortgage Demand: A Tepid Response to Falling Rates
Mortgage rates dropped last week for the fourth consecutive time, reaching their lowest level since April 2023. Despite this trend, neither homeowners nor prospective homebuyers rushed to take advantage of the situation. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume saw only a modest increase of 0.5% from the previous week.
Lower Rates Fail to Spark Refinance Interest
The average contract interest rate for 30-year fixed-rate mortgages, on loans under $766,550, fell to 6.44% from 6.50%. This marked a notable decline, with points decreasing to 0.54 from 0.60, including the origination fee for loans with a 20% down payment. Yet, the response from current homeowners was lackluster. Refinance applications dipped slightly by 0.1% from the previous week, although they were up 85% from the same period last year. The majority of existing mortgage holders still have rates well below 6%, making refinancing worthwhile only if it reduces their current rate by at least 75 basis points.
Home Purchase Applications See a Slight Uptick
While refinancing remained mostly stagnant, the demand for new home purchases showed a slight increase. Mortgage applications for purchasing a home rose by 1% compared to the previous week, although they were still 9% lower than the same week a year ago. Joel Kan, MBA’s vice president and deputy chief economist, noted, “As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”
What’s Next for Mortgage Rates?
Mortgage rates have remained relatively stable at the start of this week, with no major economic indicators to shift the market. The anticipation now turns to the monthly employment report due at the end of next week, which could trigger the next significant movement in mortgage rates. Until then, both homeowners and potential buyers appear content to wait and see, despite the lowest rates in months.
A Waiting Game Amid Lower Rates
While mortgage rates have dropped to their lowest since April 2023, the market’s response has been lukewarm. Both homeowners and homebuyers seem to be playing the waiting game, hoping for even better rates or more favorable economic conditions. As Joel Kan pointed out, patience might be the key as the market continues to adjust to the new rates and available inventory.
