Prospective home buyers visit a home for sale during an Open House in a neighborhood in Clarksburg, Maryland on September 3, 2023. Homeownership feels increasingly out of reach for younger generations of Americans, who are squeezed by student debt and childcare costs in an era of slower economic growth. The pressures come as President Joe Biden struggles to tackle negative sentiment about his handling of the economy, as he campaigns for re-election. (Photo by ROBERTO SCHMIDT / AFP) (Photo by ROBERTO SCHMIDT/AFP via Getty Images)
Roberto Schmidt | Afp | Getty Images
Another drop in mortgage interest rates caused a run on loans last week. Total mortgage application volume jumped 10.4%, compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.75% from 6.81%, with points increasing to 0.62 from 0.61 (including the origination fee) for loans with a 20% down payment. That was the lowest rate in three weeks.
“Mortgage rates declined across all loan types as Treasury yields moved lower last week on incoming inflation data, which helped to support a rise in mortgage applications,” said Joel Kan, MBA’s vice president and deputy chief economist.
Applications for a mortgage to purchase a home rose 9% for the week but were 20% lower than the same week one year ago. Mortgage rates were about half a percentage point (52 basis points higher) one year ago. Buyers, however, appeared to be enticed by the recent drop in rates.
At an open house in Detroit on Saturday, buyers braved the cold and snow to tour a renovated home that had just gone on the market. The 4-bedroom, 3-bathroom home was listed at $254,500, a little more than half the national median price but more than twice the Detroit median price. Nakita Bell, who is currently renting in Detroit, said the recent drop in rates prompted her to consider buying.
“I know I’m never gonna get 4%, but what I don’t want is 9,10, 11 and 12%. It is not a credit card, it’s a house,” said Bell.
Lower rates are also giving some current homeowners an opportunity to save money. Applications to refinance a home loan increased 11% compared with the previous week and were 10% higher than the same week a year ago. While the vast majority of current borrowers have rates lower than those offered today, the recent drop is still having some effect on those whose loans carry higher rates.