The mortgage market experienced a decline in demand last week, despite a continued drop in interest rates, according to the Mortgage Bankers Association. This article will discuss the factors contributing to this trend and the association’s predictions for the future.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.83% from 7.07% in the previous week. This drop in rates, however, did not attract significant demand from borrowers. Even with the decline, rates are still considerably higher compared to the pre-Covid levels.
The Mortgage Bankers Association noted a tepid response from borrowers to the rate decrease. Applications to refinance a home loan dropped by 2% in the week following a 19% jump in the previous week. Refinance demand remains 18% higher than the previous year’s figures. On the other hand, applications for a mortgage to purchase a home decreased by 1% in the week and were 18% lower compared to the same period last year.
Despite the drop in demand, the Mortgage Bankers Association remains optimistic about the future of the market, even in the face of an expected “mild recession” in the first half of the next year. The association predicts further declines in mortgage rates due to the Federal Reserve’s indication of multiple rate cuts in the coming year. The group anticipates modest growth in new and existing home sales, supporting growth in purchase originations.
The Mortgage Bankers Association forecasts a 22% increase in mortgage origination volume in 2024, reaching $2 trillion. This growth will be driven by a 14% rise in purchase volume and a significant 56% jump in refinance demand.
Due to the upcoming Christmas holiday, the Mortgage Bankers Association will release mortgage application data for the weeks ending December 22 and 29 on January 3.
The mortgage market saw a decline in demand despite lower interest rates. Borrowers responded weakly to the rate decrease, with applications for both refinancing and home purchase declining. However, the Mortgage Bankers Association remains optimistic about the market’s future, predicting further declines in rates and projecting growth in mortgage origination volume for the coming year.
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