Consumers returning from the holiday season have found mortgage rates at their lowest since September and are reacting dramatically.
According to the Mortgage Bankers Association’s seasonally adjusted index, the volume of mortgage applications rose nearly 28% last week compared to the previous week.
The average contract rate for 30-year fixed-rate mortgages with matching loan balances ($726,200 or less) fell from 6.42% to 6.23%, with points falling from 0.73 (including the setup fee) to 0.67 for loans payment fell by 20%.
Interest rates hit a new high of around 7.2% in late October, according to the MBA survey, but ended the year at 6.58%. A year ago, the average interest rate on the 30-year bond was 3.64%.
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Funding demand made the biggest move, rising 34% week-on-week, but was still 81% lower than the same week a year ago. The refinancing share of mortgage activity rose to 31.2% of all applications from 30.7% in the previous week.
Applications for a home-buy mortgage rose 25% week-on-week but were down 35% from the same week a year ago.
“As the spring buying season begins, lower mortgage rates and more homes on the market will help make first-time homebuyers more affordable,” said Mike Fratantoni, MBA senior vice president and chief economist.
However, the market does not see an increase in inventories. According to Redfin, a real estate agent, the number of active listings is about 21% higher than a year ago. This is mainly because homes are now on the market longer and are selling a lot less. New listings of homes for sale are down 22% year over year.