Applications to refinance home loans jumped 19 percent last week as mortgage rates fell to their lowest level since July, according to new data released by the Mortgage Bankers Association (MBA) on Wednesday.
The average 30-year fixed mortgage rate fell to 7.07 percent last week, down from nearly 8 percent in late October.
“Mortgage rates fell last week as incoming data pointed to a slowing economy and supported a pivot by the Federal Reserve to begin cutting rates next year,” Mike Fratantoni, MBA’s chief economist and senior vice president of research and industry technology, said in a statement.
“Borrowers who saw rates near 8 percent earlier this fall are now seeing some lenders offering rates below 7 percent,” Fratantoni added. “Refinance volume has picked up in response to this drop in rates, with particularly notable increases in [Federal Housing Association] and [Veterans Affairs] refinance applications.”
As the Fed has repeatedly raised interest rates over the past two years in an effort to tame sky-high inflation, mortgage rates have also risen to two-decade highs.
However, with inflation easing and the economy showing signs of slowing, the central bank has held rates steady at its last two meetings in a row and is widely expected to keep rates in a range of 5.25 to 5.5 per cent at this week’s meeting.
Overall mortgage applications also rose last week, up 7.4 per cent from the previous week, while applications to purchase single-family homes fell 1 per cent from the previous week and 18 per cent from a year ago.
“Purchase volume was running about 18 percent below last year’s pace as prospective homebuyers continue to be challenged by a lack of inventory, even as interest rates have fallen,” Fratantoni noted.
