Weekly mortgage refinance demand rose 5% after dip in mortgage rates

Weekly mortgage refinance demand rose 5% after dip in mortgage rates

A sign advertising a home for sale is displayed outside a building in Manhattan on April 11, 2024 in New York City.

Spencer Platt | Getty Images

Mortgage rates are significantly higher than they were earlier this year, but fell slightly last week after several weeks of rising steadily. That was enough to spur new demand, particularly for refinancing.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 7.29% to 7.18%, with the point value for loans with a 20% down payment remaining unchanged at 0.65 (including the origination fee). lay.

“Treasury and mortgage rates fell last week on news of a slowing labor market, with wage growth hitting its slowest pace since 2021 and the Federal Reserve announcing plans to ease quantitative tightening in June and maintaining its view that further Rate hike unlikely,” said Mike Fratantoni, senior vice president and chief economist at MBA.

The interest rate on Federal Housing Administration loans fell below 7% for the first time in three weeks, a welcome sign for first-time buyers who tend to use FHA loans.

“Approximately half of purchase loans are for first-time homebuyers, and government lending programs are an important source of financing for these homebuyers. The increase in FHA activity is a sign that this market segment is active,” Fratantoni added.

The drop in interest rates caused refinance demand to rise 5% this week, although it was still 6% lower than the same week last year. Interest rates are 70 basis points higher than a year ago, meaning very few borrowers can benefit from refinancing. A basis point is one hundredth of a percentage point.

Mortgage applications to purchase a home rose 2% this week, but were still 17% lower than the same week last year. Affordability is hitting potential buyers hard as property prices continue to rise. Due to the limited supply, competition is fierce and there are very few bargains.

Mortgage rates continued to fall earlier this week. The next big economic data comes next week with the release of the monthly consumer price index. That could move interest rates sharply in one direction or another, depending on what it says about inflation.

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