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Mortgage rates dropped last week, and homebuyers jumped off the fence. They drove total mortgage demand up 6.3% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.86% from 6.90%, with points remaining unchanged at 0.70 (including the origination fee) for loans with a 20% down payment.
While the drop in rates wasn’t exactly huge, there was a fair amount of pent-up demand among homebuyers. Some were waiting until after the election, some for lower rates, and some for more supply. All of those are now done.
Applications for a mortgage to purchase a home increased 12% from the previous week and were 52% higher than the same week one year ago. Last year at this time mortgage rates were higher, but falling. The supply of homes for sale, however, was extremely tight. It has improved markedly this year.
“With the growth in for-sale inventory and signs that the economy remains strong, buyers have remained in the market even though rates have increased recently. The increase in conventional purchase applications helped push the average purchase loan size to $439,200, its highest level in almost a month,” said Joel Kan, an MBA economist in a release.
Applications to refinance a home loan dropped 3% for the week but were 119% higher than the same week one year ago.
That annual comparisons, though, have a glitch.
“The decline in refinance activity was driven by pullbacks in FHA and VA refinances. Applications were significantly higher than a year ago by most measures, but this was compared to the week of Thanksgiving 2023, which was a week earlier than this year’s holiday,” noted Kan.
Mortgage rates started this week slightly lower but could make a bigger move after economic data is released Wednesday. Holiday weeks tend to be choppy for the markets overall, especially the bond markets.
“There can be some random trading in either direction on Thanksgiving week due to unique market conditions created by a heavily abbreviated trading week,” wrote Matthew Graham, chief operating officer at Mortgage News Daily.
