Real estate agents Rosa Arrigo, center, and Elisa Rosen, right, work an open house in West Hempstead, New York on April 18, 2021.
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Homeowners saw an opportunity last week and took advantage of it. A sudden and unexpected drop in mortgage rates sent borrowers in droves to their lenders in hopes of saving their monthly payments.
Home loan refinance requests rose 20% last week from the previous week, according to the Mortgage Bankers Association’s weekly index, which was seasonally adjusted, including for the July 4th holidays.
Refinancing demand is very sensitive to weekly and even daily interest rate changes. While the decline wasn’t huge, it was enough as interest rates were expected to rise with the stronger economy.
The average contract rate for 30-year fixed-rate mortgages with corresponding loan balances ($ 548,250 or less) decreased from 3.15% to 3.09%, with the points falling from 0.38 to 0.37 (including the initial fee) for loans with a decrease of 20% decreased payment.
“Government bond yields have tended to fall over the past month as investors remained concerned about the Covid-19 variant and slower economic growth,” said Joel Kan, associate vice president of Economic and Industry Forecasting at MBA. “As a result, mortgage rates fell for the second straight week, with the 30-year fixed rate hitting 3.09%, its lowest level since February 2021.”
Kan noted that there may have been a delayed overflow of requests from the previous week when interest rates were also down, but there hasn’t been a huge response to refinance requests.
However, refinancing demand was still 29% lower than in the same week of the year. Interest rates were actually a little higher at the time a year ago, but lending was very tight. With home loan demand slowing, lenders are now starting to loosen up a bit and that could give some borrowers opportunities to save that they couldn’t get a year ago.
Home purchase mortgage applications rose 8% in the week but were 29% lower than a year ago. The average loan amount for purchase requests fell to its lowest level since January.
“We continue to see ups and downs as demand for residential property remains strong, but inventory for sale remains low. However, lower prices can help some home buyers complete their purchases, especially first-time home buyers, ”Kan said.
The number of houses for sale is is finally beginning to rise, and that could also bring some buyers back to the market after being ousted by stiff competition last year.
However, mortgage rates started rising again this week after the Consumer price index, one of the most important benchmarks for inflation, rose the fastest in nearly 30 years.