Mortgage Rates Fall For Third Straight Week To 7.01%

Mortgage Applications & Interest Rates

According to the latest data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 17, 2024, mortgage applications increased by 1.9% from the previous week. The Purchase Index decreased slightly by approximately 1%, while the Refinance Index saw a notable increase of 7% week-over-week.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, notes that the 30-year fixed mortgage rate declined for the third consecutive week, reaching 7.01% — the lowest level in seven weeks. This drop in rates has prompted some borrowers to take action, leading to an increase in both conventional and government refinance applications. Notably, VA refinances experienced a double-digit increase for the third consecutive week.

Factors Influencing Purchase Activity

Despite the decline in mortgage rates, purchase activity continues to lag, down by 11% compared to the same period last year. Kan attributes this trend to limited inventory available for sale and high list prices, which pose significant challenges for prospective homebuyers. As a result, many are finding it difficult to enter the housing market despite the relatively more favorable interest rate environment.

Composition of Mortgage Application Activity

The refinance share of mortgage activity increased to 34% of total applications, reflecting a growing interest among homeowners in refinancing their existing mortgages to capitalize on lower rates. Additionally, the FHA and VA shares of total applications saw slight increases, indicating continued demand for government-backed mortgage programs.

Interest Rate Variations Across Mortgage Products

The report highlights variations in average contract interest rates across different mortgage products:

  • 30-year fixed-rate mortgages (conforming loan balances): Decreased to 7.01%, with points decreasing to 0.60.

  • 30-year fixed-rate mortgages (jumbo loan balances): Decreased to 7.18%, with points decreasing to 0.44.

  • 30-year fixed-rate mortgages backed by the FHA: Decreased to 6.77%, with points decreasing to 0.88.

  • 15-year fixed-rate mortgages: Decreased to 6.42% with points decreasing to 0.54.

  • 5/1 ARMs: Decreased to 6.48 percent, with points decreasing to 0.55.

Implications for Borrowers and the Housing Market

The decline in mortgage rates presents an opportunity for borrowers to secure financing at more favorable terms. However, challenges persist in the housing market, particularly in terms of inventory constraints and affordability issues. Prospective buyers should carefully assess their options and consider working with a trusted lender to navigate the complexities of the current housing landscape.

(Source: mba.org)

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