With mortgage rates pulling back slightly, demand for housing loans jumped 2.2% during the third week of November compared to the week prior.
While mortgage applications for home purchases were up 3%, refinance applications – usually the most sensitive to fluctuating rates – only rose 2% during the same period. Compared to last year, refinance applications remain 86% lower, while demand for mortgage applications for home purchases is down a more modest 41%.
Mortgage rates have fallen slightly from the high of 7.16% experienced in October, and homebuyers appear to be taking advantage. The average 30-year fixed-rate mortgage with conforming loan balances (those that meet funding criteria of Fannie Mae and Freddie Mac) fell to 6.67% during the week ending November 18 from 6.90% the week prior. Despite some reprieve, rates remain twice as high compared to the beginning of the year.
According to economist Joel Kan, MBA, “The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year.”
Kan also pointed to the drop in adjustable-rate mortgage (ARM) applications. While ARMs represented 8.8% of loans the week ending November 18, they represented between 10% and 12% of all applications during the preceding two months.
As rates lower, fixed-rate mortgages tend to become more attractive since prospective buyers can lock in lower payments. With ARMs, while a borrower may receive an initial lower rate, it has the potential to balloon higher in the future.
Thanksgiving has brought a slowdown in recently volatile mortgage rates, but Matthew Graham, chief operating officer at Mortgage News Daily, says it is temporary.
“It’s not that things aren’t moving. They just aren’t moving like normal. Expect things to get back closer to normal next week,” he said.
The “biggest moves,” according to Graham, will not be until mid-December when the Fed releases its latest inflation report and determines the direction and magnitude of the next interest rate move.
