Source-livemint.com
Mortgage rates fell to their lowest level since March last week, igniting a sharp increase in refinancing activity, although potential homebuyers remained largely indifferent.
Refinancing Boom
Applications to refinance home loans surged by 15% last week compared to the previous week, reaching the highest level since August 2022, according to the Mortgage Bankers Association’s seasonally adjusted index. This represents a 37% increase from the same week a year ago when mortgage rates were similar. Despite this jump, refinancing demand remains over 70% lower than in early 2020, before the COVID-19 pandemic began.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) dropped to 6.87% from 7.00%, with points decreasing to 0.57 from 0.60 (including the origination fee) for loans with a 20% down payment.
“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower,” said Joel Kan, MBA’s vice president and deputy chief economist.
Homebuyers Hesitate
Conversely, mortgage applications to purchase homes fell 3% for the week and were 14% lower than the same week a year ago. Homebuyers are contending with a lean and expensive market. Many buyers may be waiting for better opportunities, anticipating further rate drops.
While more homes are gradually entering the market and sellers are starting to reduce prices, particularly for properties that have been listed for an extended period, the overall supply remains tight.
Market Outlook
Despite a stronger-than-expected retail sales report, mortgage rates have not significantly changed at the start of this week. This stability may reflect ongoing market uncertainty and the broader economic environment. As potential homebuyers await more favorable conditions, the mortgage landscape remains dynamic, influenced by economic indicators and policy expectations.
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