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Homebuyer demand for purchase loans picked up for the third-consecutive week last week after mortgage rates hit their lowest levels in months, according to a weekly survey of lenders released Wednesday by the Mortgage Bankers Association (MBA).
The latest MBA Weekly Applications Survey showed applications for purchase mortgages were up 1 percent last week when compared to the week before, after an adjustment for the Juneteenth holiday.
Applications for government-backed FHA and VA purchase loans were up more than 2 percent week over week, but overall purchase loan requests were still down 13 percent from the same time a year ago.
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Joel Kan
“Mortgage rates were mostly lower last week, with the 30-year fixed rate declining slightly to 6.93 percent, the lowest level in more than three months,” MBA Deputy Chief Economist Joel Kan said in a statement. “Lower rates, however, were still not enough to entice refinance borrowers back, as most continue to hold mortgages with considerably lower rates.”
While essentially flat from the week before, requests to refinance were up 26 percent from a year ago.
Mortgage rates have been on the decline since late April, as closely watched data releases including deceleration in the Consumer Price Index for May and rising jobless claims reports suggest the economy is cooling and that the Federal Reserve may start cutting rates as soon as September.
The next big move in mortgage rates could be triggered on June 28, when the Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, is set to be updated with data from May.
Mortgage rates level out
Rates on 30-year fixed-rate conforming loans were averaging 6.85 percent Tuesday, pretty much where they were at the end of last week, according to rate lock data tracked by Optimal Blue. But that’s a 42 basis-point drop from a 2024 high of 7.27 percent registered April 25. A basis point is one-hundredth of a percentage point.
Optimal Blue data shows rates hit a 2024 low of 6.50 percent on Feb. 1, a 1.33 percentage point drop from the 2023 peak of 7.83 percent registered on Oct. 25.
Mortgage rates expected to keep falling
Source: Fannie Mae Housing Forecast, June 2024; MBA Mortgage Finance Forecast, June 2024.
In a June 24 forecast, MBA economists said they expect rates on 30-year fixed-rate loans to drop to 6.6 percent during the fourth quarter of 2024, and to an average of 6.0 percent during Q4 2025.
In a June 10 forecast (released publicly on June 21), Fannie Mae economists said they envision 30-year fixed-rate loans will drop to 6.7 percent during Q4 2024, and to 6.3 percent by the end of next year.
More listings and lower mortgage rates should boost 2025 home sales by 9.3 percent, to 5.3 million transactions, Fannie Mae forecasters said.
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