Mortgage rates dropped again last week, marking the fourth straight decline. But homeowners and buyers didn’t rush to take advantage of the lower rates.
The Mortgage Bankers Association reported that total mortgage applications inched up by just 0.5% compared to the week before.
The average rate for a 30-year fixed mortgage with a typical loan size fell to 6.44% from 6.50%.
That’s the lowest it’s been since last April. Rates have come down quite a bit – more than 0.8 percentage points – since this time last year.
You might think lower rates would get more people to refinance, but that’s not what happened.
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Refinance applications actually dipped by 0.1% from the previous week. They are up 85% from a year ago, but that’s not saying much given how slow things were then.
Why aren’t more homeowners refinancing?
Most people who already have mortgages are sitting on much lower rates than what’s available now.
One major problem for the Housing Market is that homebuyers are not responding to lower mortgage rates.
Rates have dropped from 7.2% to 6.4% over the last 3 months.
And there has been no bounce back in buyer demand.
In fact – mortgage purchase applications just came in at a… pic.twitter.com/6TEuuGwn7K
— Nick Gerli (@nickgerli1) August 28, 2024
Joel Kan from the MBA points out, “Doing a refinance is really only worth the expense if you can shave at least 75 basis points off your current rate.” In other words, the new rate needs to be quite a bit lower to make it worthwhile.
As for home buying, mortgage applications for purchases grew by 1% for the week.
But they’re still down 9% compared to last year. Kan notes, “Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”
This wait-and-see approach makes sense. With rates trending down and more homes coming on the market, buyers might get better deals if they hold off a bit longer.
The mortgage market seems to be in a holding pattern right now.
The next big move in rates might come after the monthly jobs report at the end of next week.
This report often has a big impact on the financial markets and could push mortgage rates in either direction.
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For now, it looks like both buyers and homeowners are playing it cool.