Hey folks, let’s talk mortgages and what’s been happening lately.
First off, the big news is that the average contract interest rate for 30-year fixed-rate mortgages, especially those conforming to loan balances of $726,200 or less, took a little dip. It went from 7.31% down to 7.21%. That might not sound like a lot, but every bit counts when you’re dealing with a mortgage.
However, even with this drop, it seems like the mortgage demand isn’t quite bouncing back as we’d hope. Total mortgage applications took a 2.9% hit compared to the previous week, according to the Mortgage Bankers Association’s index.
Now, here’s where it gets interesting. While rates are down a tad, they’re still sitting way higher compared to a year ago. We’re talking over a full percentage point higher. And what’s more, despite some mixed signals about the economy and a job market that’s cooling down, mortgage applications have hit their lowest levels since December 1996.
Refinancing, which usually dances to the tune of weekly interest rate changes, didn’t fare too well either. Applications to refinance a home loan were down by 5% compared to the previous week and a whopping 30% lower than the same week last year. It seems like most folks with loans these days are holding onto rates below 4% and are more inclined to take out a second loan to get some cash instead of going for a cash-out refinance.
Now, let’s talk about buying a home. Applications for mortgages to purchase homes fell by 2% for the week and a substantial 28% lower than the same week in the previous year. It’s a bit of a head-scratcher, but Joel Kan, an economist at the MBA, has an idea. He says prospective buyers are holding off because of two main culprits: low housing inventory and those pesky elevated mortgage rates.
So, what’s next on the horizon? Mortgage rates ticked up again at the start of this week, and they might keep moving depending on the economic data that rolls in. It’s been a bit of a rollercoaster lately, but it seems like 7% is becoming the new normal for mortgage rates. This has put a damper on rising home prices, which were going strong for a while but are now showing signs of cooling down once more.