The recent decrease in mortgage rates for the fourth consecutive week has not had a significant impact on either current homeowners or potential homebuyers. Despite the decrease in rates, the total mortgage application volume only rose by 0.5% compared to the previous week. This lackluster response indicates that the decrease in rates may not be substantial enough to motivate homeowners and homebuyers to take action.
Although the average contract interest rate for 30-year fixed-rate mortgages decreased to 6.44%, demand for refinancing only decreased by 0.1% from the previous week. This suggests that the majority of borrowers already have mortgages with rates lower than 6%, making it less enticing to incur the expenses associated with refinancing. In order for a refinance to be worthwhile, borrowers would need to shave off at least 75 basis points from their current rate.
Applications for a mortgage to purchase a home increased by 1% for the week, but were 9% lower than the same week one year ago. This indicates that despite the lower rates, prospective homebuyers are remaining patient. It seems that the combination of lower rates and increased for-sale inventory has not been enough to significantly boost purchase applications.
Joel Kan, MBA’s vice president and deputy chief economist, noted that despite the lower rates, purchase applications have not seen a significant increase. Prospective homebuyers are taking a cautious approach as rates continue to decline and inventory levels rise. Mortgage rates have remained relatively flat at the start of the week, with no major economic data influencing any significant changes.
While the recent decrease in mortgage rates may seem like a positive development, the lack of significant impact on both refinancing and purchase applications suggests that borrowers are not rushing to take advantage of these lower rates. The cautious approach taken by homeowners and homebuyers indicates that factors beyond just interest rates are influencing their decision-making in the current housing market.