Homebuyers in the making and a select few current homeowners are scrambling to take advantage of historically low-interest rates.
On a seasonally adjusted basis, the volume of mortgage loan applications increased by 7.2% over the previous week, according to statistics issued Wednesday by the Mortgage Bankers Association’s Market Composite Index.
While applications have increased over the previous week, they are still significantly below levels seen a year ago when interest rates were almost 1% lower than now, as measured by the MBA’s index.
However, the average long-term U.S. mortgage rate has been falling for two weeks, which may explain the application increase.
According to Freddie Mac, which purchases mortgages from lenders, the average rate on a 30-year fixed-rate mortgage dropped to 6.71% last week from 6.79% the week before. The average rate had risen for three consecutive weeks to 7.08%, its highest point since early November, until the recent reversal.
The average rate for a 30-year fixed mortgage was 5.23 percent a year ago.
Loan refinancing applications increased by a tiny margin of 6% during the last week due to the ongoing high rates but still made up less than a third of all applications. The numbers show a 41% drop from the same time last year.
Joel Kan, vice president, and deputy chief economist at the Mortgage Bankers Association (MBA), stated that higher rates had reduced the advantage of a rate/term refinance for many borrowers. They also continue dissuading cash-out refinancing as borrowers hesitate to lose their lower rates.
More than 90% of U.S. homeowners who hold a mortgage have an interest rate below 6%, according to a recent Redfin analysis, providing them even more motivation to remain in their current homes.
Because of this, fewer homes are being put up for sale, which is a problem.