Two months of declining mortgage rates have finally got the attention of homebuyers, with demand for purchase loans jumping 25 percent last week as rates continued to descend toward 6 percent, according to a weekly survey of lenders by the Mortgage Bankers Association.
“Mortgage application activity rebounded strongly in the first full week of January, with both refinance and purchase activity increasing by double-digit percentages compared to last week, which included the New Year’s holiday observance,” said MBA Chief Economist Mike Fratantoni, in a statement. “Despite these gains, refinance activity remains more than 80 percent below last year’s pace and purchase volume remains 35 percent below year-ago levels.”
According to loan lock data tracked by Optimal Blue, rates on 30-year fixed-rate conforming mortgages hit a 2022 high of 7.16 percent on Oct. 24. Mortgage rates have been in a general downward trend since then, hitting a 2023 low of 6.15 percent on Thursday, Jan. 12.
Rates have eased in the wake of the Federal Reserve’s Dec. 14 decision to slow the pace of short-term interest rate hikes, and more recent data that suggests inflation may be easing.
“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” Fratantoni said. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”
For the week ending Jan. 13, the MBA reported average rates for the following types of loans:
With the drop in rates, requests for ARM loans accounted for just 6.6 percent of all mortgage applications, down from 11.8 percent during the week ending Oct. 28.
Requests for FHA loans accounted for 13 percent of last week’s applications, down from 13.4 percent the week before. VA loan applications accounted for 11.8 percent of loan requests, down from 13.2 percent the week before.
This article was written by Matt Carter from Inman News and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to legal@industrydive.com.