Homebuyers may be in a celebratory mood after mortgage rates dropped to their lowest since May, creating a significant increase in the demand for refinancing.
The Mortgage Bankers Association compared the demand for refinancing between the previous week and last week, showing an increase of 15% in the latter. However, CNBC reported that the number essentially comes from a small base.
A decrease from 7% to 6.87% was seen in the interest rate on 30-year fixed-rate mortgages with loan balances of $766,550 or less.
According to the MBA's deputy chief economist, Joel Kan, two factors helped lower mortgage rates: cooling inflation and the high likelihood of the Fed cutting rates later in the year, as per CNBC's report.
An analysis by BankRate on July 10 showed that a typical mortgage payment for a median household still accounts for 27% of its income. It also noted that the computation was based on the assumption of a 20% down payment and a mortgage rate of 7.04%. The computation was also based on the median family income of $97,800, as provided by the U.S. Department of Housing and Urban Development.
While applications to refinance a home loan increased, applications for a mortgage to purchase a residence dropped by 3%. Compared to the same week a year ago, they were lower by 14%.
CNBC noted that present buyers are confronted with a pricey market and may still be waiting for better purchasing opportunities. With more homes coming onto the market for sale, sellers may slowly start reducing prices, giving buyers more beneficial options.
