A sign advertising a home for sale is posted outside a Manhattan building on April 11, 2024 in New York.
Spencer Platt | Getty Images
Mortgage rates are significantly higher than they were earlier this year, but they retreated slightly last week after several weeks of consecutive increases. This was enough to generate new demand, particularly in terms of refinancing.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 7.18% from 7.29%, with points unchanged at 0, 65 (including origination fees) for loans with 20% down payment.
“Treasury and mortgage rates fell last week following news of a slowing labor market, with wages growing at the slowest pace since 2021, and plans announced by the Reserve federal government to ease its quantitative tightening in June and maintain its view that further rate hikes are unlikely,” said Mike Fratantoni, senior vice president and chief economist at MBA.
The Federal Housing Administration loan rate fell below 7% for the first time in three weeks, which is a welcome sign for first-time buyers, who tend to use FHA loans.
“First-time home buyers account for about half of home purchase loans, and government loan programs are an important source of financing for these buyers. The FHA’s gain in activity is a sign that this segment of the market is active,” added Fratantoni.
The rate cut led to a 5% increase in refinancing demand for the week, although it remains 6% lower than the week a year ago. Rates are 70 basis points higher than they were a year ago, so very few borrowers can qualify for refinancing. One basis point is one hundredth of a percentage point.
Mortgage applications to buy a home increased 2% over the week, but were still 17% lower than the same week a year earlier. Affordability is hitting potential buyers hard as housing prices continue to rise. Limited supply keeps competition high, resulting in very few bargains.
Mortgage rates fell further starting this week. The next big economic data will arrive next week, with the publication of the monthly consumer price index. This could move rates sharply in one direction or the other, depending on what it says about inflation.
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