The past week gave some relief to the mortgage market after interest rates dropped, resulting in an increase in mortgage demand.
Homebuyers and homeowners took the opportunity to apply for mortgages, as seen by a 6.9% increase in mortgage applications last week compared to the previous week. This data was presented by the Mortgage Bankers Association's seasonally adjusted index. It was recorded as the lowest rates since May 2023, and the volume was also regarded as the highest since January.
The average contract interest rate for 30-year fixed-rate mortgages dropped from 6.82% to 6.55% for mortgages with conforming loan balances of $766,550 or less. Points fell from 0.62 to 0.58 for loans with a 20% down payment.
Joel Kan, Vice President and Deputy Chief Economist at the MBA, stated in a press release that mortgage rates significantly dropped last week.
"Mortgage rates decreased across the board last week following dovish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected," he said.
There has been a significant increase in the number of applications for home loan refinancing. This type of application is quite volatile since it is very sensitive to changes in the weekly rate. CNBC noted a 16% jump, and compared to the same week last year, it was 59% higher. Although the increase was significant, it was noted that it still came from a small base. The majority of borrowers have loans with rates below 5%.
There was only a small increase of 1% in applications for mortgages to purchase a home last week. However, it was still 11% lower compared to the same week of the previous year.
At the start of the current week, mortgage rates fell following Monday's selloff. Thankfully, there was some good news for the market on Tuesday, which also resulted in an increase in rates.
"This is how things often play out when the bond market forces a quick move to extreme rate levels. For example, several of the biggest drops in daily mortgage rates have followed quick moves to long-term highs," wrote Matthew Graham, Chief Operating Officer at Mortgage News Daily.
