Mortgage rates are at their lowest point since September, and it’s bringing new demand into the market. According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage application volume jumped nearly 28% last week compared to the previous week. This increase in demand is due to the drop in interest rates, which has made mortgages more affordable for potential homebuyers.
The average contract interest rate for 30-year fixed-rate mortgages decreased last week to 6.23% from 6.42%. This is a significant drop from the recent high of around 7.2% at the end of October.
This increase in demand is also reflected in the number of applications for mortgages to purchase a home, which rose 25% week-to-week. However, it’s important to note that these numbers are still 35% lower than the same week one year ago, as less homes are for sale today than then.
Refinance demand also made a big move, increasing 34% from the previous week. However, it’s still 81% lower than the same week one year ago, as rates remain higher today than then. The refinance share of mortgage activity increased to 31.2% of total applications from 30.7% the previous week.
As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers. Mike Fratantoni, senior vice president and chief economist at the MBA, stated that “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”
However, the market is not seeing any surge in inventory. According to Redfin, a real estate brokerage, the number of active listings is about 21% higher than it was a year ago. This is mostly because homes are now sitting on the market longer, with far fewer sales. New listings of homes for sale are down 22% year over year.
Overall, the drop in interest rates has brought new demand into the mortgage market, making it a great time for potential homebuyers to enter the market. However, the market still faces challenges in terms of inventory and new listings, which could impact the affordability and availability of homes for potential buyers.