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Lower mortgage rates are pulling some current homeowners back to the refinance market, but not enough to offset the drop in demand from homebuyers.
Mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.41% from 6.49%, with points decreasing to 0.63 from 0.68 (including the origination fee) for loans with a 20% down payment. That is 73 basis points lower than it was a month ago but still more than three full percentage points higher than it was a year ago.
Applications to refinance a home loan rose 5% for the week but were still 86% lower than the same week one year ago. There are still precious few current borrowers who can benefit from a refinance at today’s higher interest rates. The refinance share of mortgage activity increased to 28.7% of total applications from 26.1% the previous week.
Mortgage applications to purchase a home fell 3% for the week and were 40% lower than the same week one year ago.
“Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” noted Joel Kan, an MBA economist in a release.
The average loan size for homebuyer applications decreased to $387,300 — its lowest level since January 2021, which is consistent with slightly stronger government applications and a rapidly cooling home-price environment, according to Kan.
Mortgage rates haven’t moved much this week, with no significant economic news making headlines. The next big shift will likely come next week, with the much-anticipated monthly read on inflation.