Rosalind Evans
In recent weeks, the housing market has witnessed a notable uptick in mortgage demand, sparked by a slight decrease in interest rates. This gradual shift indicates a renewed interest among current homeowners and potential buyers, marking the highest level of activity in the sector within the past five weeks. The Mortgage Bankers Association’s latest findings provide insights into this emerging trend, highlighting how even minor fluctuations in interest rates can significantly impact the real estate market.
According to the Mortgage Bankers Association’s seasonally adjusted index, there was a 2.8% increase in mortgage demand last week compared to the previous one, marking the second consecutive week of gains. Notably, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained stable at 7.61%, with a slight decrease in points to 0.67, including the origination fee, for loans with a 20% down payment.
Joel Kan, MBA’s vice president and deputy chief economist, noted, “Although Treasury rates dipped midweek, mortgage rates changed little on average through the week.” Despite this, there was a 2% increase in applications to refinance a home loan for the week, 7% higher than last year. However, the incentive to refinance is not significantly strong, as most borrowers already have lower interest rates from the record lows during the early years of the COVID-19 pandemic.
Purchase mortgage applications rose 3% from the previous week, though 12% lower than a year ago. Kan added, “Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at deficient levels. Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners.”
This week’s dip in mortgage rates is attributed to a sharp bond market rally following a government inflation report that was lower than analysts’ expectations. While this has offered some respite, the still-rising home prices and low supply continue to pose significant challenges for potential buyers.
The current trends in the mortgage market, characterized by a cautious rise in demand and slightly more favourable interest rates, offer a glimpse of potential recovery in the housing sector. Although the market still faces hurdles such as high home prices and limited supply, these recent developments provide a modest, meaningful sign of optimism for current and prospective homeowners.
