Mortgage Rate Drop Attracts Buyers
A home available for sale is shown on May 22, 2024 in Austin, Texas. Mortgage applications ticked up for the week ending June 21.
Mortgage applications ticked up for the week ending June 21 amid a deceleration in the cost of home loans, the Mortgage Bankers Association (MBA) said on Wednesday.
MBA's Market Composite Index, which measures mortgage applications, reported nearly a 1 percent increase from the previous week. It is the third week in a row of increased applications, MBA data shows.
Meanwhile, refinancing activity, while unchanged during the period, was up 28 percent from the same time last year.
The uptick in activity comes when mortgage rates trending below 7 percent over the past few weeks helped slightly reduce the monthly payments that potential buyers will have to pay for their homes.
"Mortgage rates were mostly lower last week, with the 30-year fixed rate declining slightly to 6.93 percent, the lowest level in more than three months," Joel Kan, MBA's deputy chief economist, said in a statement shared with Newsweek.
But the drop in rates failed to bring in more homeowners willing to change the terms of their loans, he said, even as interest in the Federal Housing Administration (FHA) and Veterans Affairs (VA) mortgages jumped for the week ending June 21.
"Lower rates, however, were still not enough to entice refinance borrowers back, as most continue to hold mortgages with considerably lower rates," Kan added. "Purchase applications did see a small increase after adjusting for the Juneteenth holiday. Government purchase loans, primarily FHA and VA, saw gains of more than 2 percent over the previous week, as homebuyers in those segments sought to take advantage of the recent rate relief."
Nearly 90 percent of American homeowners have properties where the cost of their mortgage is below 6 percent, according to Redfin, which is cheaper than what the current market is offering. This helps explain why the refinancing share of mortgage applications stalled for the week ending June 21 despite a fall in rates.
One area that saw activity jump up was adjustable rate mortgages (ARM). That area saw its share of applications rise to more than 6 percent of the market for the week as ARM rates were lower than the 30-year fixed rate. The average rate for a 5-year ARM, in which rates adjust annually after the first five years, was at 6.29 percent.
FHA loans also recorded a jump in their share of applications to more than 13 percent from 12.7 percent the week ending June 21. Buyers who were able to secure the government-backed mortgages were able to get rates at 6.82 percent, which, while higher than the prior week, was still below the general 30-year fixed rate of 6.93 percent, MBA said.
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