Refinancing applications are rising as interest rates drop to the lowest level in three months.
- Mortgage rates have been slowly dropping in the last few weeks.
- Applications to refinance a home loan jumped 6% last week compared to the week before but still 85% lower than the same week one year ago, according to the Mortgage Bankers Association (MBA).
- Mortgage applications to purchase a home decreased by 0.1% for the week—always the slowest week of the year—and were 36% lower than the same week one year ago.
Why it’s news
This year has been challenging for homebuyers in the U.S. as mortgage rates continued rising throughout the last year as the Federal Reserve attempted to tame inflation.
In the last few weeks, mortgage rates have started cooling and recently hit the lowest level in three months.
The recent drop didn’t spur a huge crowd of people looking to buy a new home, but it did send people trying to lower their monthly payments. Applications to refinance a home loan jumped 6% last week compared to the week before.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.34% from 6.42%, according to CNBC writer Diana Olick.
“The latest data on the housing market show that homebuilders are pulling back the pace of new construction in response to low levels of traffic, and we expect this weakness in demand will persist in 2023, as the U.S. is likely to enter a recession,” says MBA’s chief economist, Mike Fratantoni. “However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the
year, as affordability improves with both lower rates and slower home-price growth.”