Mortgage demand is on the rise as rates fall

with mortgage rates nearly 50 basis points from the recent peak about a month ago, borrower demand picked up again this week, according to the Mortgage Bankers Association (MBA).

The market composite index, a measure of home loan application volume, rose 2.2% during the week ending November 18 after posting a 2.7% increase in the previous week. However, compared to the same week in 2021, the index fell 67.8%.

Purchase requests were up 2.76% this week, compared to the previous week, but down 41% year-over-year. Meanwhile, the refinancing demand index, which fell 86.2% year-over-year, rose 1.5% from the previous week.

“Lower mortgage rates should improve the purchasing power of would-be homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year,” said Joel Kan, vice president and chief economist. MBA adjunct, in a statement.

Mortgage rates, which had been on an upward trend with the Federal Reserve interest rate hike, began to fall after a lower-than-expected rate consumer price growth in October. The Consumer Price Index (CPI) rose by 7.7% year-over-year, marking the smallest increase in 12 months since the year ending January 2022.

MBA estimates that the average 30-year fixed-rate mortgage contract for conforming loans ($647,200 or less) fell to 6.67% from 6.90% the week before. At their recent peak about a month ago, rates hit 7.16%.

Jumbo home loans (above $647,200) this week also declined to 6.30% from 6.51%, the MBA said.

The average contract interest rate for the 5/1 ARM increased from 5.73% to 5.78% in the same period, reducing borrowers’ appetite for the product. ARM applications fell 15% compared to the previous week and 16.6% compared to the same period in 2021.

“With the rate decline, the share of ARM applications also decreased to 8.8% of loans last week, below the range of 10% and 12% over the past two months,” according to Kan.

The report shows that the share of refinances increased from 27.6% to 28.4% of total applications this week.

the Federal Housing Administration (FHA) of total claims decreased marginally to 13.4% from 13.5% the previous week. the veterans affairs (VA) of total applications fell to 10.5% from 10.6%, and the United States Department of Agriculture (USDA) was unchanged at 0.6%.

The survey, conducted weekly since 1990, covers 75% of all US retail residential mortgage applications.

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