Potential homebuyers are responding to lower mortgage rates and a greater supply of homes for sale. This boosted mortgage demand last week as consumers seeking to refinance declined.
According to the Mortgage Bankers Association's seasonally adjusted index, total mortgage application volume increased 2.8% compared to the previous week. An additional adjustment was made for the Thanksgiving holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.86% to 6.69%, with points on loans at 20% down from 0.70 to 0.67, inclusive the processing fee) decreased payment. This is the lowest value in more than a month.
The number of mortgage applications to buy a home rose 6% this week, the highest level since January. The number of applications was 21% lower than the same week a year ago, but there could be some year-over-year disruption because Thanksgiving fell on a different week this year than last year.
“Recent strength in buying activity continues, supported by lower interest rates and higher inventory levels, providing more options for potential buyers compared to earlier in the year,” said Joel Kan, an MBA economist, in a press release.
The number of applications to refinance a home loan fell 1% over the week, 7% lower than a year ago. Most borrowers today have loans at much lower interest rates than they do today.
“Conventional refinance applications fell despite lower interest rates, but FHA and VA refinances rebounded compared to the previous week,” Kan added.
Mortgage rates continued their decline earlier this week, but nothing dramatic. Investors are weighing the geopolitical headlines in France and South Korea against some positive comments on the economy made by various Federal Reserve speakers on Tuesday afternoon.
More market-moving economic data is due on Wednesday with the release of the ADP employment report and the ISM services index. Federal Reserve Chair Jerome Powell will also participate in a moderated discussion at The New York Times DealBook Summit.