Mortgage demand falls despite another drop in interest rates –

House for sale with real estate sign “For sale” in the garden in spring or summer. No people.

Fstop123 | E+ | Getty Images

According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage demand fell last week compared to the previous week, even as interest rates continued to fall.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased from 7.07% to 6.83%, with points on loans at 20% down from 0.59 to 0.60 (inclusive). processing fee) payment increased, the group said on Wednesday. Despite the recent decline, rates are still much higher than at the start of the Covid pandemic.

“With the positive news about the decline in inflation and the FOMC [Federal Open Market Committee] “Forecasts signaling a shift toward rate cuts have sent the 30-year fixed mortgage rate to its lowest level since June 2023,” said Mike Fratantoni, MBA senior vice president and chief economist.

“At least since last week, the reaction of borrowers to this interest rate increase has been rather muted,” Fratantoni said.

According to MBA data, applications to refinance a home loan fell 2% in the week ending Friday after rising 19% the week before. However, refinance demand was 18% higher than the same week a year ago.

The number of mortgage applications to purchase a home fell 1% for the week and was 18% below the same period last year.

Despite the drop in demand, the Mortgage Bankers Association predicted good news for the market, although it expected a “mild recession” in the first half of next year.

“We expect this monetary policy stance will support a further decline in mortgage rates, just in time for the spring housing market,” the group said, referring to the Federal Reserve’s recent signal that it will raise its key interest rate several times next want to lower year. “We forecast modest growth in new and existing home sales in 2024, supporting growth in purchase transactions.”

The association said it expects mortgage origination volume to rise 22% to $2 trillion in 2024, with a 14% increase in purchase volume and a 56% increase in refinance demand.

Due to the Christmas holidays next week, the MBA will release mortgage application data for the weeks ending December 22nd and 29th on January 3rd.

Don’t miss these stories from CNBC PRO: