The recent drop in mortgage rates for the fourth consecutive week failed to generate significant excitement among current homeowners and potential homebuyers. Despite the decrease in average contract interest rates for 30-year fixed-rate mortgages, the total mortgage application volume only rose by a mere 0.5% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This lackluster response indicates a lack of eagerness to take advantage of the lower rates to refinance or purchase a new home.
Although the average contract interest rate for mortgages fell to its lowest point since April 2023, the demand for refinancing decreased by 0.1% from the previous week. The decrease in refinance applications suggests that many borrowers may already have mortgages with rates below 6%, making it less beneficial for them to refinance at this time. To make a refinancing worthwhile, borrowers typically need to be able to lower their current rate by at least 75 basis points.
On the other hand, applications for mortgages to purchase a home saw a slight increase of 1% from the previous week. However, the number of purchase applications remained 9% lower than the same week one year ago, indicating a lack of robust growth in the housing market. Prospective homebuyers seem to be adopting a more cautious approach, waiting for rates to fall further and for the inventory of homes for sale to increase before making a purchase.
Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, noted that despite the lower rates, purchase applications have not seen significant movement in recent weeks. The steady rates at the beginning of the week suggest that there is currently no significant economic data driving them one way or the other. This stable environment may be contributing to the subdued response from homeowners and homebuyers to the falling mortgage rates.
While the decline in mortgage rates may seem like a positive development for the housing market, the lackluster increase in mortgage applications indicates a more cautious attitude among borrowers. Both current homeowners and potential homebuyers are taking a wait-and-see approach, hoping for rates to drop further before making any significant financial decisions.
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