Lower Mortgage Rates Are Enticing Potential Home Buyers
Homebuyers are reacting to lower mortgage rates and an increase in available homes. This has driven up mortgage demand recently, despite a decrease in refinancing applications.
According to the Mortgage Bankers Association’s seasonally adjusted index, overall mortgage application volume rose by 2.8% from the previous week, adjusted for the Thanksgiving holiday.
The average interest rate for 30-year fixed-rate mortgages with conforming loan balances, which are $766,550 or less, dropped to 6.69% from 6.86%. Points also fell from 0.70 to 0.67 for loans requiring a 20% down payment. This marks the lowest rate in over a month.
Mortgage applications for buying homes saw a 6% increase last week, the highest level since January. However, applications are still 21% lower compared to the same week last year, partly due to the change in Thanksgiving timing.
Joel Kan, an economist at the MBA, noted that the increase in purchasing activity is driven by lower rates and more homes available for sale, giving buyers greater choice than earlier this year.
Refinance applications dipped by 1% for the week and are down 7% from last year. Many current borrowers have financing at significantly lower rates than those available now.
Kan mentioned that while conventional refinance applications fell, FHA and VA refinance numbers improved compared to the previous week.
At the beginning of this week, mortgage rates continued to decrease slightly. Investors are balancing news from France and South Korea with positive economic remarks from several Federal Reserve officials.
More significant economic data is expected on Wednesday with the release of the ADP employment report and the ISM services index. Federal Reserve Chairman Jerome Powell will also participate in a discussion at The New York Times DealBook Summit.