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Last week, mortgage rates fell, sending homebuyers scrambling. They increased overall mortgage demand by 6.3% compared to 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 ($766,550 or less) fell from 6.90% to 6.86%, with points for loans with a 20% down payment remaining unchanged at 0.70, including the origination fee .
While the drop in interest rates wasn't exactly huge, there was significant pent-up demand among homebuyers. Some waited until after the election, others for lower interest rates and others for more supply. This is all done now.
The number of mortgage applications to purchase a home increased 12% compared to the previous week and was 52% higher than the same week a year ago. At this time last year, mortgage rates were higher but declining. However, the supply of homes for sale was extremely tight. It has improved significantly this year.
“Given the increase in inventory for sale and signs that the economy remains strong, buyers have remained in the market even as interest rates have risen recently. The increase in conventional purchase applications helped push the average purchase loan amount to $439,200, the highest level in nearly a month,” said Joel Kan, an MBA economist, in a press release.
The number of applications to refinance a home loan fell 3% this week but was 119% higher than the same week a year ago.
However, there is a flaw in these year-to-year comparisons.
“The decline in refinance activity was driven by declines in FHA and VA refinances. Applications were significantly higher by most measures than a year ago, compared to Thanksgiving week 2023, which was a week earlier than this year's holiday,” Kan noted.
Mortgage rates started slightly lower this week but could see a larger increase following the release of economic data on Wednesday. The holiday weeks tend to be choppy for markets as a whole, particularly bond markets.
“Due to the unique market conditions created by a greatly shortened trading week, there may be random transactions in both directions during Thanksgiving week,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.