Mortgage rates soared over 7% just a month ago, but since then they have fallen more than half a percentage point. Still, mortgage loan application volume decreased 0.8% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The results also include an adjustment for the observance of the Thanksgiving holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 6.49% from 6.67%, with points remaining at 0.68 (including the origination fee) for loans with a 20% down payment.
The weakness continues to be in refinance demand, which dropped 13% from the previous week and was 86% lower than the same week one year ago. Strange, given that roughly 100,000 more current borrowers could now benefit from a refinance with the latest rate drop, according to Black Knight.
Mortgage applications to purchase a home gained 4% from the previous week but demand was 41% lower than the same week one year ago. Sales of existing homes continue to drop, while newly built home sales are benefiting from builder concessions, specifically deals in which the builder buys down the mortgage rate.
“The economy here and abroad is weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes. Purchase activity increased slightly after adjusting for the Thanksgiving holiday, but the decline in rates was still not enough to bring back refinance activity,” noted Joel Kan, an MBA economist.
The adjustable-rate mortgage share of application activity increased slightly to 9%, which is lower than the roughly 12% range a month ago, when rates were higher. The ARM share, however, was about 3% at the start of this year, when the 30-year fixed rate hovered near a record low. ARM’s offer lower interest rates but higher risk.
Mortgage rates haven’t moved much to start this week, but by the end of the week that could change, as the highly anticipated monthly employment report is set for release. Any unanticipated swing in either direction will have a direct effect on mortgage rates.