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Will Lower Mortgage Rates Revive Homebuyer Demand?

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The largest weekly decline in mortgage rates since 2020 sparks increase in home loan applications after four weeks of declining demand, MBA’s survey says.

As mortgage rates continue to retreat from their June highs, there are promising signs that homebuyer demand could be picking up as more inventory becomes available, according to a weekly lender survey by the Mortgage Bankers Association.

Requests for purchase loans picked up a seasonally-adjusted 1 percent last week compared to the week before while refinancing applications were up by 2 percent, the MBA’s Weekly Mortgage Applications Survey shows.

All in all, mortgage applications increased 1.2 percent week over week — the first uptick after four consecutive weeks of declining demand. But compared to a year year ago, demand for purchase loans was down 16 percent, and requests to refinance were down 82 percent.

The MBA survey shows rates on 30-year fixed-rate mortgages averaged 5.43 percent last week, down from 5.74 percent the week before. It was the largest, weekly decline since 2020 as bond markets reacted to signals from Federal Reserve Chairman Jerome Powell that the Fed will take a measured approach to future rate hikes.

Joel Kan

“The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed,” said MBA forecaster Joel Kan, in a statement. “Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity.”

Mortgage rates ease


Since more than doubling from historic, pandemic-induced lows, rates for 30-year fixed-rate loans have eased somewhat from a 2022 high of 6.06 percent registered June 14 by the Optimal Blue Mortgage Market Indices.

For the week ending July 29, the MBA reports average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances $647,200 or less), rates averaged 5.43 percent, down from 5.74 percent the week before. Although points increased to 0.65 from 0.61 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate still decreased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 5.06 percent, down from 5.32 percent the week before. With points decreasing to 0.36 from 0.43 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 5.39 percent, down from 5.54 percent the week before. Although points increased to 1.03 from 0.85 (including the origination fee) for 80 percent LTV loans, the effective rate still decreased.
  • Rates for 15-year fixed-rate mortgages, popular with homeowners who are refinancing, averaged 4.74 percent, down from 4.95 percent the week before. With points decreasing to 0.65 from 0.67 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 4.55 percent, down from 4.67 percent. With points decreasing to 0.69 from 0.76 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.

Requests for ARM loans accounted for 8.4 percent of applications, down from 9.1 percent the week before. Requests for FHA loans accounted for 11.9 percent of all applications, down from 12.1 percent the week before. VA loan applications represented 10.8 percent of all loan requests, up from 10.6 percent the week before.

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