Mortgage rates had a slight increase last week for the second consecutive week, although they still remain at a level that is preferred by consumers. Despite this, there was a significant rise in total mortgage application volume compared to the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 6.81% from 6.76%. While this rate is considerably lower than the peak of 8% in October, it is still higher compared to the rates in the 7% range witnessed throughout the previous year. Although there has been a recent increase, mortgage rates are still relatively low, motivating borrowers to consider refinancing.
Refinancing Applications
Applications to refinance home loans surged by 19% compared to the previous week, and an impressive 30% increase from the same week a year ago. Despite the fact that there are few borrowers who would actually benefit from a refinance given the low rates experienced just two years ago, those who have the opportunity are eagerly taking advantage of the current market conditions.
Purchase Applications
Applications for mortgages to purchase homes experienced a 6% increase from the previous week. However, compared to the same week in the previous year, these applications were still 16% lower. The limited supply of available homes and rising home prices continue to pose challenges for potential buyers in the market.
According to Joel Kan, an economist from the Mortgage Bankers Association (MBA), the recent surge in purchase and refinance applications is a positive start for the year. However, it may partly be attributed to a catch-up in activity after the holiday season and year-end rate declines. The volatility in mortgage rates and overall low activity levels suggest that the market still faces uncertainties.
Real estate agents report that they are witnessing a new surge in demand from buyers who were previously discouraged by the higher rate environment. This indicates that the current rate levels are favorable to potential homebuyers.
According to a recent report from Fannie Mae, more consumers are expecting mortgage rates to fall further. This sentiment may be influenced by the recent slight increase in rates to start the week. However, rates still remain within the 6% range, which is comparatively competitive.
Upcoming Economic Indicator
The release of the monthly consumer price index (CPI) on Thursday is expected to be a significant economic indicator to watch. If the CPI indicates higher levels of inflation, it may put upward pressure on mortgage rates.
While mortgage rates experienced a slight increase in recent weeks, they still remain within a range that is appealing to consumers. Refinancing applications have surged, indicating that borrowers are taking advantage of the lower rates. Purchase applications also saw an increase, although they remain lower compared to the previous year. Real estate agents report a surge in demand from buyers who were previously on the sidelines. Looking ahead, the upcoming release of the monthly CPI will provide further insight into the future direction of mortgage rates.
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