Demand for mortgage refinances jumps 14% as interest rates fall to lowest since August –

Houses in Hercules, California, USA.

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After rising over 8% in October, mortgage rates are falling back to 7%, giving the refinancing market a boost.

Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) fell from 7.37% to 7.17%, with points for loans with a falling to 0.60 from 0.64 (including the origination fee ) dropped 20% down payment according to Mortgage Bankers Association. That was the lowest level since August.

As a result, applications to refinance a home loan increased 14% compared to the previous week and were 10% higher than the same week a year ago.

“Slower inflation and the fact that financial markets are anticipating the possible end of the Fed’s rate hike cycle are both reasons for the recent decline in interest rates,” said Joel Kan, MBA vice president and deputy chief economist. “Refinance applications posted their strongest week in two months, increasing year-over-year for the second week in a row for the first time since the end of 2021.”

However, the actual level of refinance demand is still quite low considering so many borrowers refinanced in the early years of the Covid pandemic, when rates hit more than a dozen record lows.

“Recent increases may indicate that 2023 was the bottom of this cycle for refinancing activity, which is consistent with our lending forecast,” Kan added.

The number of mortgage applications to purchase a home fell 0.3% for the week, down 17% from the same week last year. Potential buyers are still struggling with high prices and a low inventory of homes for sale.

Mortgage rates continued to fall this week. The government’s all-important monthly jobs report, expected to be released on Friday, could either continue or reverse that trend, depending on what it says about the state of the economy.

“November was a great month for mortgage rates, and December picks up right where it left off,” said Matthew Graham, chief operating officer at Mortgage News Daily. He noted that a weaker-than-expected job vacancies report released Tuesday helped continue the trend.

“The job market was too hot. Job vacancies are actually still above trend, but the faster slowdown is having a positive impact on interest rates,” Graham added.

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