- Home loan applications rose 7% last week as the 30-year fixed rate for mortgages fell further.
- The Mortgage Bankers Association said the rate on the popular mortgage product fell to 6.2%, the lowest in four months.
- Lower mortgage rates could spur more buyers into the currently “tepid” housing market.
Demand for US home loans rose again in early 2023 as a key borrowing rate slipped to a four-month low, a nascent trend that could point to improving conditions in the hard-hit housing market.
Mortgage applications increased by 7% on a seasonally adjusted basis from one week earlier, the Mortgage Bankers Association said Wednesday. Survey results from the week ended January 20 were adjusted to account for the Martin Luther King, Jr. holiday.
The rise marked the third week in a row of higher mortgage demand.
Also for a third straight week was a drop in the benchmark mortgage rate for homebuyers. The average contract interest rate for 30-year fixed mortgages for conforming loan balances of $$726,200 or less fell to 6.2%. It was 6.23% a week earlier.
The move left the 30-year fixed rate at its lowest since September 2022.
“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market. Many have been waiting for affordability challenges to subside,” Joel Kan, MBA’s deputy chief economist, said about the survey results.
Affordability worsened in 2022 as mortgage rates spiraled higher on the heels of the Federal Reserve’s fast and large rate hikes aimed at cooling inflationary pressures. The 30-year mortgage rate in October hit 7.16% to help create the least affordable environment for American home buyers since 2001.
Refinancing activity also increased last week, by 15%, the MBA said. However, there’s “very little refinance incentive” for most borrowers who are locked into lower rates. The pace of refinancing activity was 77% behind from a year ago.
Economists at Goldman Sachs this week said easing mortgage rates are likely to help end the crash in housing prices within six months.