US Markets
Wednesday, November 8th, 2023 3:22 pm EDT
Key Points
- Mortgage rates experienced the largest one-week drop in over a year, resulting in increased demand for mortgages after a month of decline.
- Total mortgage application volume rose by 2.5% in the week following the drop in mortgage rates. The average interest rate for 30-year fixed-rate mortgages also decreased, contributing to this increase in demand.
- While applications for refinancing increased by 2% for the week, they were still 7% lower than the same week the previous year. Applications for purchasing a home increased by 3% for the week but remained 20% lower than the same week a year ago, mainly due to the continued rise in home prices driven by low supply.
Mortgage rates experienced the most significant one-week drop in over a year, leading to a surge in mortgage demand after a month of decline. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume increased by 2.5% compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 7.86% to 7.61%, with points decreasing from 0.73 to 0.69 (including the origination fee) for loans with a 20% down payment.
This rate decrease was attributed to several factors, including updates from the U.S. Treasury, the Federal Reserve adopting a dovish tone in the November FOMC statement, and data indicating a slower job market, as explained by Joel Kan, the vice president and deputy chief economist at the MBA.
Applications for mortgage refinancing increased by 2% for the week, although they were 7% lower than the same week the previous year. Many homeowners had already refinanced their mortgages two years ago when rates were exceptionally low, so the incentive to refinance is limited. Additionally, most current homeowners have mortgages with rates below 4%.
Applications for home purchase mortgages rose by 3% for the week but remained 20% lower than the same week a year ago. The drop in interest rates hasn’t been sufficient to offset the continuous rise in home prices, driven by a severe shortage of available homes for sale.
While mortgage rates began the week slightly higher, the current week features fewer economic events or reports that would impact rates. The previous week saw a unique combination of the Federal Reserve maintaining interest rates and a monthly employment report that was below expectations, resulting in the significant rate decrease.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/11/08/mortgage-rates-plunge-and-demand-finally-inches-back.html
