The recent decrease in mortgage rates for the fourth week in a row did not seem to have a significant impact on either current homeowners or potential homebuyers. Mortgage application volume increased by only 0.5% compared to the previous week, according to the Mortgage Bankers Association’s index. This minimal increase suggests that the lower rates did not spur a surge in new mortgage applications.
Despite the decrease in mortgage rates, the demand for refinancing decreased by 0.1% from the previous week. This decline is surprising considering that rates have dropped more than 80 basis points from a year ago. The majority of borrowers already have mortgages with rates below 6%, making it less appealing to refinance unless they can significantly lower their current rate.
Applications for mortgages to purchase homes rose by 1% for the week. However, this increase was significantly lower compared to the same week one year ago, with a 9% decrease in applications. This trend suggests that despite lower rates, prospective homebuyers are still hesitant to make a move. The increase in for-sale inventory may have contributed to this cautious approach.
Joel Kan, MBA’s vice president and deputy chief economist, noted that despite the lower rates, purchase applications have not seen a significant increase. He attributes this to prospective homebuyers being patient, especially with rates trending lower and more homes becoming available for sale. Mortgage rates have remained relatively flat at the start of the week, with no major economic data impacting their movement.
Overall, the current trend in mortgage rates suggests that while lower rates are favorable, they have not generated the expected increase in mortgage applications. Prospective homebuyers are adopting a wait-and-see approach, possibly to take advantage of further rate decreases or to assess the impact of increased housing inventory on prices. It remains to be seen how these trends will evolve in the coming weeks and whether they will lead to a more significant uptick in homebuying activity.