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Mortgage interest rates pulled back last week after jumping sharply to start July. That lit a fire under refinance demand but did little to help potential homebuyers.
Total mortgage application volume rose 1.1% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
This comes as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.87% from 7.07%, with points falling to 0.66 from 0.74 (including the origination fee) for loans with a 20% down payment. That rate was 5.82% the same week last year.
“Mortgage rates declined last week, as markets responded positively to incoming data showing that U.S. inflation continues to cool,” said Joel Kan, an MBA economist, in a release.
Lower rates pushed current homebuyers to call their lenders. Applications to refinance a home loan jumped 7% for the week but were still 32% lower year over year. The refinance share of mortgage activity increased to 28.4% of total applications from 26.8% the previous week.
Applications for a mortgage to purchase a home fell 1% for the week and were 21% lower than the same week in 2022. The weakness in homebuying is being exacerbated by falling supply and rising home prices. Prices had cooled off for much of last year, but they are now reaccelerating due to the low supply and still strong demand.
Mortgage rates haven’t budged much to start this week, as they’re still hanging in the high 6% range on the 30-year fixed. Markets and investors are now digesting quarterly earnings reports and trying to game the Federal Reserve‘s next moves.