Mortgage rates fell again last week, and while the drop wasn’t huge, it was enough to spur current homeowners to look for some savings. The surge in refinances was behind a 5.4% increase in total mortgage demand compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.67% from 6.69%, with points falling to 0.66 from 0.67 (including the origination fee) for loans with a 20% down payment. That was the third straight weekly decline.
Applications to refinance a home loan surged 27% week to week and were 42% higher than the same week one year ago. The percentages are large, likely because the base volume is still so small. Most borrowers today have mortgages with rates well below what is now being offered. From 2020 through the first half of 2022, rates were below 4%. Mortgage rates last week were 40 basis points lower than they were the same week one year ago.
The refinance share of mortgage activity increased to 46.8% of total applications from 38.7% the previous week.
Applications for a mortgage to purchase a home fell 4% for the week and were 4% higher than the same week one year ago. Demand from homebuyers had been gaining over the last several weeks, as more inventory came on the market.
“Purchase applications remained relatively strong and have shown annual gains in all but one week over the past three months. In addition to lower rates, purchase activity continues to be supported by sustained housing demand and inventory that continues to grow gradually in many markets,” wrote Joel Kan, an MBA economist, in a release.
Mortgage rates gained 10 basis points to start this week, according to a separate survey from Mortgage News Daily. That erased much of last week’s drop. But they could swing in either direction Wednesday, with the release of the monthly consumer price index, an indicator of inflation.
“There’s no question that Wednesday morning’s CPI data is the last significant piece of the puzzle that the Fed will receive before deciding ‘to cut or not to cut’ next week,” wrote Matthew Graham, chief operating officer at Mortgage News Daily. ”The market knows this, of course. As such, a big deviation from forecasts would definitely be enough to get things moving.”