Potential homebuyers are responding to lower mortgage rates and a higher supply of homes for sale. That fueled mortgage demand last week, as consumers looking to refinance pulled back.
Total mortgage application volume rose 2.8% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. An additional adjustment was made for the Thanksgiving holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.69% from 6.86%, with points decreasing to 0.67 from 0.70 (including the origination fee) for loans with a 20% down payment. That is the lowest rate in over a month.
Applications for a mortgage to purchase a home jumped 6% for the week, the highest level since January. Applications were 21% lower than the same week one year ago, but there may be some noise in the annual comparison as Thanksgiving fell on a different week this year than last year.
“The recent strength in purchase activity continues, supported by lower rates and higher inventory levels, which are giving prospective buyers more options compared to earlier in the year,” said Joel Kan, an MBA economist in a release.
Applications to refinance a home loan fell 1% for the week and were 7% lower than one year ago. Most borrowers today have loans with far lower rates than are being offered today.
“Conventional refinance applications declined despite the lower rates, but FHA and VA refinances rebounded from a week ago,” Kan added.
Mortgage rates continued their decline to start this week, but nothing dramatic. Investors are weighing geopolitical headlines in France and South Korea against some positive commentary on the economy from various Federal Reserve speakers Tuesday afternoon.
Wednesday is set for more market-moving economic data with the release of the ADP Employment Report and ISM Services Index. Federal Reserve Chairman Powell will also appear in a moderated discussion at the New York Times DealBook Summit.