Mortgage rates are sliding back toward 7% after rising over 8% in October, reviving the refinance market.
- IMPORTANT NOTES
- After reaching 8% earlier this fall, the popular 30-year mortgage rate has dropped back toward 7%.
- The refinancing application index jumped 14% from the previous week and was 10% higher than the same week a year earlier.
- Mortgage applications for house purchases dipped by 0.3% this week and were 17% lower than a year ago.
According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) dropped to 7.17% last week from 7.37%, with points dropping to 0.60 from 0.64 (including the origination fee) for loans with a 20% down payment. It was the lowest reading since August. As a result, refinance applications jumped 14% from the previous week and were 10% higher than the same week a year ago.
“Slower inflation and financial markets anticipating the potential end of the Fed’s hiking cycle are both behind the recent decline in rates,” said Joel Kan, MBA vice president and deputy chief economist. “Refinance applications saw the strongest week in two months and increased on a year-over-year basis for the second consecutive week for the first time since late 2021.”
However, the real amount of refinance demand remains fairly low, owing to the fact that so many borrowers refinanced during the initial years of the COVID epidemic, when rates hit more than a dozen record lows.
“Recent increases could signal that 2023 was the low point in this cycle for refinance activity, consistent with our originations forecast,” he said.
Mortgage applications for house purchases dipped 0.3% last week and were 17% lower than the same week a year ago. Potential buyers are still contending with high costs and a scarcity of available properties. This week, mortgage rates continued to fall. The government’s crucial monthly employment report, due out Friday, could either maintain or reverse that trend, depending on what it says about the strength of the economy.
“November was a stellar month for mortgage rates, and December is picking up right where it left off,” said Matthew Graham, CEO of Mortgage News Daily. He pointed out that a softer-than-expected report on job opportunities released on Tuesday contributed to the trend.
“The labor market had become overheated.” Indeed, job vacancies remain ‘above-trend,’ but by cooling off faster, there are favorable implications for interest rates,” Graham remarked.
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