"Weekly mortgage demand stalls despite rates hitting lowest since April"

Weekly mortgage demand has stalled even though interest rates have fallen to their lowest level since April 2023. This unexpected stagnation in demand occurs despite the favourable borrowing conditions, highlighting a potential disconnect between market rates and consumer interest. The reasons behind this trend could include broader economic factors or shifts in housing market dynamics.

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Mortgage rates declined for the fourth consecutive week, but neither current homeowners nor prospective buyers showed much enthusiasm.

According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume increased by only 0.5% last week compared to the previous week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances—$766,550 or less—dropped to 6.44% from 6.50%. Points also decreased from 0.60 to 0.54, including the origination fee, for loans with a 20% down payment. This represents the lowest rate since April 2023 and a decline of over 80 basis points from a year ago.

Despite this decrease, refinance demand fell by 0.1% from the previous week, though it remains 85% higher compared to the same week last year. The issue is that most borrowers currently have mortgages with rates below 6%, making refinancing worthwhile only if it reduces the rate by at least 75 basis points. Mortgage applications for purchasing a home increased by 1% for the week but were 9% lower than the same week a year ago.

Joel Kan, MBA’s vice president and deputy chief economist, noted, “Despite lower rates, purchase applications have not seen significant movement. Prospective buyers are remaining patient as rates decrease and available inventory increases.” Mortgage rates have remained stable at the start of this week, with no major economic data influencing them. The next significant change might occur with the monthly employment report scheduled for the end of next week.

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Source: CNBC‍