Mortgage rates fell last week and home buyers jumped the fence. They caused overall mortgage demand to rise 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) decreased to 6.86% from 6.90%, and points were unchanged at 0.70, including the initial fee, for loans with a 20% down payment. .
While the drop in rates wasn’t exactly huge, there was a good amount of pent-up demand among homebuyers. Some waited until after the election, others to get lower rates, and others to get more supply. All that is already done.
Mortgage applications for the purchase of a home increased 12% compared to the previous week and were 52% higher than the same week a year ago. This time last year, mortgage rates were higher, but falling. The supply of homes for sale, however, was extremely scarce. It has improved noticeably this year.
“With inventory for sale growing and signs that the economy remains strong, buyers have remained in the market even though rates have recently increased. The increase in conventional purchase applications helped push the average purchase loan size to $439,200, its highest level in almost a month,” Joel Kan, MBA economist, said in a statement.
Applications to refinance a home loan fell 3% for the week, but were 119% higher than the same week a year ago.
However, those annual comparisons have a problem.
“The decline in refinance activity was driven by setbacks in FHA and VA refinances. Claims were significantly higher than a year ago by most measures, but this was compared to Thanksgiving week 2023, which was a week earlier than this year’s holiday.” Kan pointed out.
Mortgage rates started this week slightly lower, but could take a bigger step after economic data is released on Wednesday. The holiday weeks tend to be hectic for markets in general, especially bond markets.
“There may be some random trading in either direction on Thanksgiving week due to the unique market conditions created by a very abbreviated trading week,” wrote Matthew Graham, chief operating officer of Mortgage Information Everyday.
