Mortgage Rates Drop, Boosting Home Purchase Applications

In the week ending March 8, 2024, the contract rate on a 30-year fixed mortgage in the US decreased by 18 basis points to 6.84%, marking the first time in a month that rates have fallen below 7%. This significant decline, the largest in nearly three months, has led to an increase in applications for home purchases, with the Mortgage Bankers Association’s index rising 4.7% to a four-week high of 147.7.

While mortgage rates have dropped from their peak in October, they remain significantly higher than in 2021, presenting challenges for prospective buyers. However, this recent decrease in rates has helped stabilize housing demand, and further declines could encourage more buyers to enter the market.

The MBA’s overall index for mortgage applications, which tracks both home purchases and refinancing, climbed 7.1% last week to a four-week high. The measure for refinancing rose 12.2%, the most in five weeks. This increase indicates that not only are more people looking to purchase homes, but existing homeowners are also taking advantage of lower rates to refinance their mortgages.

The MBA survey, which uses responses from mortgage bankers, commercial banks, and thrifts, has been conducted weekly since 1990 and covers more than 75% of all retail residential mortgage applications in the US. The data suggest that while the housing market is still facing challenges due to higher rates compared to previous years, the recent drop in mortgage rates has provided some relief and could lead to increased activity in the market.