Mortgage refinance demand increases as homeowners take advantage of lower interest rates

A sign advertising home loan rates for buying or refinancing at a Bank of America in New York.

Scott Mill | CNBC

After rising at the end of the year, mortgage rates fell sharply last week. This stimulated demand from current owners who were hoping to save on their monthly payments, but it did little to stimulate potential buyers.

As a result, the total volume of mortgage applications rose just 1.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contractual interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell last week to 6.42% from 6.58%, with points remaining at 0.73 (including origination fee) for loans with a 20% downgrade. Payment. A year ago, this rate was 3.52%.

“Mortgage rates fell last week as markets reacted to data showing a weakening economy and slowing wage growth. All loan types in the survey saw rates fall,” he said. said MBA economist Joel Kan.

The fall in rates led to a 5% increase in applications for refinancing a mortgage. Volume, however, was still 86% lower than the same week a year ago. Even with rates below their previous peak of more than 7% last fall, at the current rate only 270,000 borrowers could benefit from a refinance, according to Black Knight, a mortgage technology and analytics firm. A year ago, with a rate half lower than today, around 7 million borrowers could benefit from it.

Mortgage applications for buying a home fell 1% for the week and were 44% lower than the same week a year ago. This was the lowest reading since 2014. Today, buyers are not just facing higher interest rates, but a dwindling supply. They are also seeing prices drop and maybe waiting to see how far they go.

So far this week, mortgage rates have moved in a narrow range. The market is eyeing the next publication of the monthly consumer price index scheduled for Thursday. If it shows that inflation is slowing further, mortgage rates could fall further.

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