Demand for mortgages rises by 2.2% as interest rates fall slightly

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Mortgage applications last week rose 2.2% from the previous week, prompted by a slight decline in interest rates, according to the Mortgage Bankers Association’s seasonally adjusted index.

Refinancing applications, which are typically the most sensitive to weekly interest rate movements, rose 2% this week, but were still 86% lower than the same week a year ago. Even with interest rates bouncing back from their recent high of 7.16% a month ago, few can still benefit from a refinance — just 220,000, according to real estate data firm Black Knight.

Mortgage applications to buy a home were up 3% this week, but they were down 41% from a year ago. Some potential buyers may now be venturing back in and hearing that there is less competition and more bargaining power, but there is still a shortage of homes for sale and prices have not fallen significantly.

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A home, available for sale, is shown on August 12, 2021 in Houston, Texas.

Brandon Bell | Getty Images

Rates are still twice what they were at the start of the year, but they eased a bit last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) fell from 6.90% to 6.67%, with points rising from 0.68 to 0.56 (including the initial fee) for loans with a discount of 20% payment.

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“The mortgage rate cut should improve the purchasing power of potential homebuyers, who have been largely sidelined because mortgage rates have more than doubled in the past year,” said Joel Kan, an MBA economist, in a press release. “With the fall in rates, the ARM share [adjustable-rate] of applications also fell to 8.8% of loans last week, down from 10% and 12% in the past two months.”

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Mortgage rates haven’t changed at all this week as the upcoming Thanksgiving holiday tends to weigh on volumes.

“It’s not that things aren’t moving. They just aren’t moving like normal,” said Matthew Graham, chief operating officer at Mortgage News Daily. “Expect things to get closer to normal again next week, but the market will continue to wait until December 13 and 14 for the biggest moves.”

That’s when the government releases its next big report on inflation and the Federal Reserve announces its next rate hike.

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