Recent data from the Mortgage Bankers Association shows that mortgage rates have been falling for the past three weeks. Despite this trend, there has been a 15% drop in applications to refinance home loans compared to the previous week. This decline may be attributed to the fact that the demand for refinancing surged by 23% over the past four weeks as mortgage rates decreased. It is worth noting that the average contract interest rate for 30-year fixed-rate mortgages also saw a slight decrease to 6.50% from 6.54%.
In addition to the decrease in refinance applications, there has also been a 5% drop in applications for mortgages to purchase homes. This decline is concerning as it indicates that homebuyers are still struggling to afford the limited inventory available for sale. Despite the lower mortgage rates, the demand for home purchase loans is currently at its lowest level since February.
Joel Kan, an MBA economist, mentioned in a recent release that both mortgage rates and applications have now stabilized after a period of volatility in financial markets. While lower mortgage rates are favorable, Kan pointed out that the current rate of 6.50% is still considered high for borrowers who had previously secured rates below 5%. This discrepancy in rates may be deterring some borrowers from taking advantage of the lower rates.
Although home prices have been steadily rising, there has been a slower pace of increase compared to previous years. This could be partially attributed to the increase in supply on the market, which may lead potential homebuyers to be more selective in their choices. With more options available, buyers can take their time in making decisions and may not feel as pressured to act quickly due to fluctuating mortgage rates.
Looking ahead, Mortgage News Daily reported a further decline in mortgage rates at the beginning of the week. However, it is important to note that the recent decrease in rates may not significantly impact home purchase applications, given the current challenges in the housing market. As Matthew Graham, chief operating officer at Mortgage News Daily, pointed out, the decrease in rates may not necessarily lead to a surge in applications if the underlying factors affecting the housing market remain unchanged.