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Last week’s dip in mortgage rates didn’t translate into more applications from homebuyers, but did boost interest in refinancing from anemic levels, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).
The MBA’s Weekly Mortgage Applications Survey shows applications for purchase loans were down 1 percent last week compared to the week before after adjusting for seasonal factors, including the July 4 holiday. Purchase loan applications were down 21 percent from a year ago.
While applications to refinance were up 7 percent week over week, lenders received 32 percent more refi requests during the same period last year.
Joel Kan
“Mortgage rates declined last week, as markets responded positively to incoming data showing that U.S. inflation continues to cool,” said MBA Deputy Chief Economist Joel Kan in a statement. “Despite last week’s lower rates, purchase applications decreased, as home purchase activity is still being held back by low housing supply and rates that are still much higher than a year ago.”
Black Knight’s Optimal Blue Mortgage Market Indices, which track daily rate lock data, show rates on 30-year fixed-rate conforming mortgages hit a 2023 high of 7.02 percent on July 7, before retreating below 7 percent on last week’s news that inflation dropped steeply in June to the lowest level in more than two years.
While the Federal Reserve is now seen as nearing the end of a rate-hike campaign aimed at fighting inflation, the current lack of inventory driven by mortgage lock-in effect may persist if Fed policymakers maintain a ‘higher-for-longer’ rate strategy to combat inflation, forecasters at mortgage giant Fannie Mae warned in a forecast released Wednesday.
Mortgage rates expected to decline
Fannie Mae forecasters foresee a gradual decline in rates on 30-year fixed-rate mortgages but don’t expect them to fall below 6 percent until the final three months of next year. In a June 20 forecast that will soon be updated, economists at the Mortgage Bankers Association said they anticipated sub-six percent mortgage rates by the final three months of this year.
Maegan Sherlock, senior research analyst for John Burns Research and Consulting, told Inman Intel this week that consumer surveys she’s conducted suggest that the “magic number” for mortgage rates is 5.5 percent, with most consumers saying they’d be willing to purchase homes if rates were to fall below that rate.
The CME Fed Watch tool, which tracks bets made by interest rate traders, predicts that by this time next year, the Fed will have reversed course and dialed back rates by as much as a full percentage point.
For the week ending July 14, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 6.87 percent, down from 7.07 percent the week before. With points decreasing to 0.66 from 0.74 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 6.89 percent, down from 7.04 percent the week before. Although points increased to 0.64 from 0.59 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 30-year fixed-rate FHA mortgages, rates averaged 6.77 percent, down from 6.86 percent the week before. With points decreasing to 1.12 from 1.23 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- Rates for 15-year fixed-rate mortgages, which are popular with borrowers who are refinancing, averaged 6.36 percent, down from 6.42 percent the week before. With points decreasing to 0.72 from 1.22 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 5/1 adjustable-rate mortgage (ARM) loans, rates averaged 6.27 percent, up from 6.24 percent the week before. But with points decreasing to 0.91 from 1.42 (including the origination fee) for 80 percent LTV loans, the effective rate decreased.
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