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Patrick T. Fallon | Bloomberg |
Demand for mortgage loans is currently heavily focused on refinancing as interest rates have fallen for the fifth week in a row.
According to the Mortgage Bankers Association's seasonally adjusted index, the total volume of mortgage applications increased by only 1.6 percent last week compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.43% from 6.44%, with points for loans with a 20% down payment increasing to 0.56 from 0.54 (including the origination fee). The rate was 78 basis points lower than the same week a year ago.
Applications to refinance a home loan fell 0.3% for the week, but were 94% higher than a year ago. That may seem like a massive increase, but it's a very low number. Still, it's the only bright spot in an industry that's tanked due to higher interest rates and very weak home sales.
“Refinancing applications declined slightly but continued to show strong annual gains as borrowers refinanced at higher interest rates to lower their monthly payments,” said Joel Kan, an MBA economist. “The refinancing share of applications averaged nearly 46 percent in August, the highest monthly average since March 2022.”
Mortgage applications to buy a home rose 3% for the week, but are still 4% below the same week a year ago. Home sales have been very sluggish all summer as buyers face astronomically high prices; the drop in interest rates has not been enough to get them to buy.
The slight increase is due to demand for government loans. FHA and VA loans offer low or no down payment options and are preferred by lower-income buyers.
Mortgage rates were little changed on Tuesday as all eyes were on the monthly jobs report and other economic data due later in the week.
Correction: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances was 78 basis points lower than the same week a year ago. An earlier version misstated the rate.