An aerial photo shows a subdivision replacing a rural landscape on July 19, 2023 in Hawthorne Woods, Illinois.
Scott Olson | Getty Images
Mortgage interest rates fell very slightly last week, but not enough to persuade potential home buyers today to stay away from buying.
The average contract interest rate on 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell to 6.82% from 6.87%, with points increasing to 0.59 from 0.57 (including origination fees) for loans with a 20% down payment, according to the Mortgage Bankers Association. That’s the lowest level since February of this year.
Interest rates have fallen more than 20 basis points in the past few weeks, but applications for a mortgage to buy a home fell another 4% last week from the previous week, according to the seasonally adjusted MBA index. Buying demand is now 15% lower than it was in the same week a year ago. A basis point is one-hundredth of a percentage point.
“Purchase orders fell as affordability challenges persist with interest rates at current levels and home prices rising strongly in many markets,” Joel Kahn, a business economist, said in the statement.
Home buyers are also likely to wait for interest rates to fall further. The Federal Reserve is expected to cut rates in September. Although mortgage rates don’t track the Fed exactly (they loosely track the yield on 10-year U.S. Treasury bonds), rates will fall if investors believe inflation is easing.
“I think affordability is still limited,” analyst Ivy Zelman said in an interview with CNBC’s “The Exchange.” “We probably want to see mortgage rates go down by 100 basis points, so I think if we have five, even in the top five, I think the market could see more momentum.”
Home loan refinance applications were essentially flat, rising just 0.3% over the week. Demand is 38% higher than the same week a year ago, but it’s coming from a very low base. Rates today are slightly lower than they were at this time last year.
“Refinance applications increased, driven by activity in conventional and Federal Housing Administration loan applications, as some borrowers took advantage of the opportunity to act. Furthermore, the conventional refinance index reached its highest level since September 2022,” Kahn added.
