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Mortgage rates fell last week and homebuyers gave up on their purchases. They pushed total mortgage demand up 6.3% from 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 qualifying loan balances ($766,550 or less) fell to 6.86% from 6.90% and remained unchanged at 0.70 points for loans with 20% down (including origination fee).
While interest rates have not fallen significantly, there is still considerable pent-up demand from homebuyers. Some are waiting for after the election, some are waiting for lower interest rates, some are waiting for more supply. All of this is now complete.
Applications for mortgage loans to purchase homes increased 12% from the previous week and 52% from the same week a year ago. Mortgage rates were higher this time last year but have declined. However, the supply of homes for sale is extremely tight. Things have gotten significantly better this year.
“With for-sale inventory growing and signs that the economy remains strong, buyers remain in the market despite the recent increase in interest rates. An increase in traditional purchase applications helped push the average purchase loan size to $439,200, which is Highest level in 2017.
Applications for home loan refinancing fell 3% this week but were up 119% from the same week a year ago.
There is a slight problem with year-to-year comparisons, however.
“The decline in refinance activity was driven by a pullback in FHA and VA refinances. Applications are significantly higher than a year ago by most measures, but this is Compare that to Thanksgiving week in 2023, which is a week earlier than this year’s holiday.
Mortgage rates are starting the week slightly lower, but could see more swings following Wednesday’s economic data. Markets in general, and bond markets in particular, tend to be volatile during holiday weeks.
“Thanksgiving week may see some random trading due to the unique market conditions created by a significantly shortened trading week,” Matthew Graham, chief operating officer of Mortgage News Daily, wrote.
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