Despite a fourth consecutive week of falling mortgage rates, both existing homeowners and potential homebuyers showed minimal interest in taking advantage of the situation. The Mortgage Bankers Association reported a mere 0.5% increase in total mortgage application volume compared to the previous week, indicating a lackluster response to the declining rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances dropped to 6.44% from 6.50%. Additionally, points decreased to 0.54 from 0.60, marking the lowest rate since April 2023. While rates have fallen by over 80 basis points from a year ago, the demand for refinancing only decreased by 0.1% from the previous week, which suggests that many borrowers already have mortgage rates well below the current average.
For many borrowers, refinancing may not be a financially viable option unless they can reduce their current rate by at least 75 basis points. Given that the majority of borrowers already have rates below 6%, the incentive to refinance diminishes significantly, explaining the lack of enthusiasm in response to falling rates.
While applications for mortgages to purchase homes increased by 1% for the week, they remained 9% lower than the same week in the previous year. Despite the lower rates and increasing inventory of homes for sale, prospective homebuyers appear to be adopting a wait-and-see approach, as observed by Joel Kan, MBA’s vice president and deputy chief economist.
Mortgage rates have maintained a flat trend at the beginning of the current week, with no significant economic data influencing them. This stagnation in response to falling rates raises concerns about the overall health of the housing market and the impact of interest rates on consumer behavior in the real estate sector.
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