Despite mortgage rates falling for the third consecutive week, there was a significant drop in applications to refinance a home loan. The Mortgage Bankers Association reported a 15% decrease in refinance applications compared to the previous week. This decline comes after a 23% surge in demand over the past four weeks, as mortgage rates saw a decrease. The average contract interest rate for 30-year fixed-rate mortgages also dropped to 6.50% from 6.54%, with points increasing slightly to 0.60 from 0.57 for loans with a 20% down payment.
According to Joel Kan, an economist at the MBA, both mortgage rates and applications have now stabilized after a period of financial market volatility. However, despite the decrease in rates, they are still relatively high at 6.5%, which may not be appealing to borrowers who have previously secured rates below 5%. Kan also noted that homebuyers are not as influenced by the recent drop in rates, as they are still struggling to afford the limited inventory available for sale. This has resulted in a 5% decrease in applications for a mortgage to purchase a home, with demand reaching its lowest level since February.
Looking ahead, mortgage rates are expected to continue declining, with Mortgage News Daily reporting even lower rates at the beginning of the week. Chief Operating Officer Matthew Graham mentioned that while the lowest rates in over two weeks may spark enthusiasm, there is nothing significantly different from the current trends. As more supply enters the housing market, potential homebuyers may become more selective, even with lower mortgage rates available.
The impact of falling mortgage rates on refinancing and home purchases is complex. While lower rates have led to increased demand for refinancing, homebuyers are facing challenges in affording properties due to rising home prices and limited inventory. It will be interesting to see how the mortgage market evolves in the coming weeks, as rates continue to fluctuate and buyers navigate a competitive housing market.