Mortgage demand jumps as interest rates drop

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A For Sale sign is posted in front of a property in Monterey Park, California on August 16, 2022.

Frederic J. Brown | AFP | Getty Images

Mortgage interest rates fell for the third straight week, while mortgage demand also rose again.

Total application volume increased 7% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.2% from 6.23%, with points increasing to 0.69 from 0.67 (including the origination fee) for loans with a 20% down payment. That rate was just about half that one year ago.

Applications to refinance a home loan saw the sharpest gains, up 15%, compared with the previous week. They were still 77% lower than the same week a year ago, but that annual gain is now shrinking fast.

Mortgage applications to purchase a home rose 3% for the week but were 39% lower year over year. Homebuyers are still trickling back into the market, as house prices ease slightly. There is still, however, precious little to choose from with inventory low.

“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market,” said Joel Kan, an MBA economist. “Many have been waiting for affordability challenges to subside.”

Mortgage rates have moved slightly higher to start this week, but are still well within the new lower range. Some real estate brokerages, like Redfin, are reporting an uptick in buyer interest with rates at these levels, but the housing market still seems to be in a holding pattern, as potential sellers and buyers sit tight, waiting to see where prices shake out.

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