Mortgage demand at highest level in 5 weeks after interest rates fall

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Home buyers attend an open house in Seattle.

Mike Kane | Bloomberg | Getty Images

Current homeowners and home buyers are responding to lower mortgage rates, albeit slowly.

Mortgage demand rose 2.8% last week, compared to the previous week, according to the Mortgage Bankers Association’s quarterly adjusted index. That was the second straight week of gains.

After a sharp drop the previous week, the average contract interest rate for 30-year fixed-rate mortgages with a similar loan balance ($726,200 or less) remained unchanged at 7.61% on the week last year, with points decreasing to 0.67 from 0.69, including the origination fee, for loans with a 20% down payment.

“While Treasury rates dipped midweek, mortgage rates were largely unchanged during the week,” said Joel Kan, MBA vice president and deputy chief economist.

However, applications for home loan refinancing increased 2% for the week and were 7% higher than the same week a year ago. Mortgage rates this month are not that different from last November, so there is little incentive to refinance. Most lenders will have much lower interest rates due to the record low rates seen in the first few years of the Covid-19 pandemic.

Home mortgage applications were up 3% from the previous week and were 12% lower than the same week a year ago. Lower rates may help a bit, but still-rising home prices and a still-low housing supply are bigger hurdles for today’s buyers.

“Both purchase and refinance applications increased to their highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still challenging for many homebuyers and current homeowners,” Kan said.

Mortgage rates moved lower this week, thanks to a sharp rally in the bond market after the government’s monthly inflation report came in lower than analysts had predicted.

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