Homebuyers take notice as mortgage rates continue to fall

Mortgage rates have come down nearly a full percentage point from 2022 highs registered in October and homebuyers are taking notice, according to a weekly lender survey released Wednesday by the Mortgage Bankers Association.

Applications for purchase mortgages were up a seasonally adjusted 4 percent last week compared to the week before, marking the fifth increase in homebuyer demand for mortgages in the last six weeks, the MBA Weekly Mortgage Applications Survey found.

Looking back a year, however, applications for purchase loans were down 38 percent. Requests to refinance were also up 3 percent from the week before, but down 85 percent from a year ago.

“Overall applications increased, driven by increases in purchase and refinance activity,” said MBA Deputy Chief Economist Joel Kan, in a statement. “However, with rates more than three percentage points higher than a year ago, both purchase and refinance applications are still well behind last year’s pace. The ongoing moderation in home-price growth, along with further declines in mortgage rates, may encourage more buyers to return to the market in the coming months.”

A monthly survey released last week by Fannie Mae found home buyer sentiment ticked up slightly in November for the first time in nine months. That survey found that most consumers expected mortgage rates to keep rising, but more are starting to share the views of some economists that rates may have peaked.

With the Federal Reserve expected to slow the pace of short-term interest rate hikes, the wide “spread” between 10-year Treasury yields and mortgage rates could return to something closer to historical norms, which could help keep mortgage rates trending down from October’s highs.

Mortgage rates retreat from 2022 highs

The Optimal Blue Mortgage Market Indices, which are updated daily, show that since hitting a 2022 high of 7.16 percent on Oct. 24, 30-year fixed-rate mortgages have fallen by 86 basis points, dipping to 6.3 percent Tuesday.

For the week ending Dec. 9, the MBA reported average rates for the following types of loans:

• For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less), rates averaged 6.42 percent, up from 6.41 percent the week before. With points increasing to 0.64 from 0.63 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate remained unchanged from last week.
• Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 6.14 percent, up from 6.08 percent the week before. Although points decreased to 0.42 from 0.5 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
• For 30-year fixed-rate FHA mortgages, rates averaged 6.40 percent, up from 6.39 percent the week before. With points increasing to 1.03 from 0.93 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
• Rates for 15-year fixed-rate mortgages averaged 5.92 percent, up from 5.84 percent the week before. Although points decreased to 0.54 from 0.55 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
• For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.58 percent, down from 5.59 percent the week before. With points decreasing to 0.80 from 0.91 (including the origination fee) for 80 percent LTV loans, the effective rate decreased.

The MBA survey, which covers over 75 percent of all U.S. retail residential mortgage applications, has been conducted weekly since 1990.

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 [email protected].