Mortgage Applications Decline Despite Further Interest Rate Decrease
The average contract interest rate for 30-year fixed-rate mortgages saw a decline to 6.83% from 7.07%, with points slightly increasing to 0.60 from 0.59, including the origination fee, for loans featuring a 20% down payment, as per the group’s Wednesday announcement. However, even with this recent decrease, rates remain significantly higher compared to their levels at the onset of the Covid pandemic.
According to Mike Fratantoni, MBA’s senior vice president and chief economist, “The 30-year fixed mortgage rate reached its lowest level since June 2023, aligned with the positive news of the drop in inflation and FOMC’s projections towards rate cuts.” Yet, Fratantoni noted a subdued response from borrowers to this rate shift, at least as of last week.
Refinance applications underwent a 2% decline for the week, following a notable 19% surge the preceding week, according to MBA’s data. However, refinance demand still marked an 18% increase compared to the corresponding week from the previous year. Simultaneously, mortgage applications for home purchases saw a 1% downturn for the week and were 18% lower compared to the same period last year.
Despite the recent decline in demand, the Mortgage Bankers Association remains optimistic about the market’s future, despite anticipating a “mild recession” in the first half of the coming year. The association foresees further drops in mortgage rates, aligning with the Federal Reserve’s recent signals indicating potential cuts in its benchmark rate throughout the next year. Looking ahead optimistically, the group predicts modest growth in new and existing home sales in 2024, driving up purchase originations. They anticipate mortgage origination volume to increase by 22% to $2 trillion in 2024, with a 14% rise in purchase volume and a significant 56% surge in refinance demand.