Mortgage rates experienced the biggest one-week drop in more than a year last week, causing the first increase in mortgage demand in one month.
The total volume of mortgage applications increased by 2.5% last week, compared to the previous week, according to the Bankers Association’s seasonally adjusted Mortgage Index.
The average contractual interest rate for 30-year fixed-rate mortgages with matching loan balances (USD 726,200 or less) decreased to 7.61% from 7.86%, with points falling to 0.69 from 0.73 (including construction fees) for 20% low-interest loans.
Home loan refinancing applications rose 2% during the week and were 7% lower than the same week a year ago. Mortgage rates are very close to what they were at this time last year, so there are not so many incentives for refinancing. Most homeowners refinanced two years ago, when interest rates were hovering near record lows. The vast majority of current homeowners hold mortgages with rates below 4%.
Mortgage applications to buy a home rose by 3% during the week but were 20% lower than the same week last year. The decrease in interest rates is still not enough to compensate for the extremely high housing prices, which continue to rise due to the very low supply of houses for sale.
Mortgage rates started the week slightly higher, but this week carries fewer economic events or reports that will affect prices. The combination of the Fed’s pause on interest rates last week, and a lower-than-expected monthly employment report was the perfect storm for a dramatic move to cut interest rates.
