Mortgage Refinancing Sees 6% Increase as Rates Reach 9-Month Low

Last week, mortgage interest rates decreased, yet this did not have a major effect on the demand from homebuyers. However, it did prompt homeowners to search for ways to reduce their monthly payments.

The Mortgage Bankers Association's seasonally adjusted index showed that applications to refinance a home loan increased 6% from the week prior. Despite this, the volume was still 85% lower than the same week in the previous year.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances of $647,200 or less has decreased to 6.34%, down from 6.42%. The points associated with these loans, including the origination fee, have also decreased to 0.59 from 0.64 for those with a 20% down payment.

Applications for mortgages to purchase a home dropped by 0.1% for the week and were 36% lower than the same week in the previous year. This is usually the slowest period for the housing market, and while interest rates are lower than they were a month ago, they are still more than double what they were a year ago.

Mike Fratantoni, MBA's chief economist, noted that the most recent housing market data indicates that homebuilders are slowing down the rate of new construction due to a lack of interest. He believes this trend of weak demand will continue into 2023, as the U.S. is likely to experience a recession. However, if mortgage rates continue to decline, as predicted, more buyers may return to the market later in the year due to improved affordability from lower rates and slower home-price growth.

Mortgage rates began the week on an upward trajectory and continued to climb on Tuesday, following the Bank of Japan's unexpected shift in monetary policy. According to a survey from Mortgage News Daily, the average rate on the 30-year fixed rose by 11 basis points.

Matthew Graham, chief operating officer at Mortgage News Daily, commented that this event is unlikely to have a lasting effect on US rates in the near future. He also noted that the impact was greater than it would have been due to the season.

Interest rates have increased by 25 basis points since last Thursday.