Weekly Mortgage Demand Surges as Rates Dip Below 7%

March 13, 2024

In a recent development that has caught the attention of potential homeowners and real estate analysts alike, mortgage rates have experienced a slight decline, falling just below the 7% mark. This rate adjustment has sparked a notable surge in mortgage demand, marking the second consecutive week of increased activity. According to the Mortgage Bankers Association’s seasonally adjusted index, total application volume has risen 7.1% compared to the previous week.

The dip in mortgage rates to an average contract interest rate of 6.84% for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less has been a critical driver behind this uptick in demand. Mike Fratantoni, the MBA’s senior vice president and chief economist, attributes this decrease to “incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months.”

This decline in rates has particularly revitalized refinancing activity, which saw a 12% increase for the week, now 5% higher than the same period last year. “While these percentage increases are large, the level of refinance activity remains quite low,” Fratantoni noted, suggesting that most current refinancing may involve borrowers who secured loans when rates were nearing their peak in the past two years.

Moreover, the market for home purchases has also felt the impact, with applications rising by 5% over the week. However, challenges persist, as this figure is still 11% lower than the previous year, underlining the obstacles posed by high home prices, a limited housing supply, and the ongoing struggle for more affordable starter homes. 

Following higher-than-expected consumer price reports, the slight increase in mortgage rates at the start of the week hints at cautious optimism among market watchers. Matthew Graham, chief operating officer at Mortgage News Daily, suggests that the market is beginning to anticipate more favorable conditions for rates, driven by signs of easing inflation and economic stability.

This recent fluctuation in mortgage rates and the consequent surge in demand highlight the dynamic nature of the real estate market. As potential buyers and homeowners navigate these changes, the insights from industry experts offer valuable perspectives on the evolving landscape of mortgage financing.

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