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Mortgage demand roars back to life as interest rates dip below 7%
Payne Capital Management President Ryan Payne weighs in on the U.S. economy, arguing that purchasing power will continue to ‘strengthen’ for the American people.
A key measure of home-purchase applications surged last week as mortgage rates dipped below 7% for the first time in more than a month.
The Mortgage Bankers Association’s (MBA) index of mortgage applications jumped 7.1% for the week ended March 8, compared with a 9.7% increase the previous week, according to new data published Wednesday.
The data also showed that the average rate on the popular 30-year loan dropped to 6.87% last week.
“Mortgage rates dropped below 7% last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” said Mike Fratantoni, MBA’s chief economist.
MORTGAGE CALCULATOR: SEE HOW MUCH HIGHER RATES COULD COST YOU
A home for sale in Cupertino, California, on Feb. 7. (Loren Elliott/Bloomberg via Getty Images / Getty Images)
Housing demand had ground to a halt earlier this year as rates moved higher, but it is stirring back to life as rates start to fall. Applications for a mortgage to purchase a home rose 5% from the previous week. Application volume is down 11% compared with the same time last year.
Demand for refinancing also climbed higher last week, rising 12% from the previous week, according to the survey. Compared with the same time last year, refinance applications are up 5%.
“While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years,” Fratantoni said.
WHY ARE GROCERIES STILL SO EXPENSIVE?
The interest rate-sensitive housing market has cooled rapidly as a result of the Federal Reserve’s aggressive tightening campaign. Policymakers lifted the benchmark federal funds rate 11 times over the course of 16 meetings in an attempt to crush stubborn inflation and slow the economy.
Houses in San Jose, California, on Feb. 7. (Loren Elliott/Bloomberg via Getty Images / Getty Images)
Central bank officials have opened the door to cutting interest rates this year but indicated they will not do so until they are confident that inflation is conquered.
“The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” Fed Chair Jerome Powell said last week while testifying on Capitol Hill.
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Now, most economists expect the cuts to begin in June amid signs that inflation remains abnormally high.
Higher mortgage rates have not only weighed on consumer demand, they have limited inventory. That is because sellers who locked in a low mortgage rate before the COVID-19 pandemic have been reluctant to sell with rates continuing to hover near a two-decade high, leaving few options for eager would-be buyers.
Available home supply remains down a stunning 34.3% from the typical amount before the pandemic began in early 2020, according to a separate report published by Realtor.com.
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As we look ahead to 2024, many homeowners and prospective buyers are wondering what to expect when it comes to mortgage rates. The landscape of the housing market is constantly changing, so it’s important to stay informed about trends and predictions. In this blog post, we will discuss some factors that could impact mortgage rates in 2024 and what homeowners and buyers can expect.
One factor that could impact mortgage rates in 2024 is the overall state of the economy. If the economy is strong and growing, we may see higher mortgage rates as the Federal Reserve looks to combat inflation. On the other hand, if the economy is stagnant or in a recession, we may see lower mortgage rates as the Fed looks to stimulate growth. It’s important to keep an eye on economic indicators such as GDP growth, unemployment rates, and inflation to get a sense of where mortgage rates may be heading.
Another factor that could impact mortgage rates in 2024 is Federal Reserve policy. The Fed plays a key role in setting interest rates, and their decisions can have a ripple effect on mortgage rates. If the Fed decides to raise interest rates in response to inflation, we may see an increase in mortgage rates. Conversely, if the Fed decides to lower interest rates to stimulate growth, we may see a decrease in mortgage rates. Keeping up with the latest news and announcements from the Fed can give homeowners and buyers a sense of where mortgage rates may be heading.
In terms of specific cities and local mortgage companies, it’s important to note that mortgage rates can vary depending on location and lender. For example, in a city like New York City, where real estate prices are high, mortgage rates may be higher compared to a city like Indianapolis, where real estate prices are lower. Additionally, local mortgage companies may offer competitive rates and terms compared to national lenders. For example, in New York City, local lenders like Quontic Bank and CrossCountry Mortgage may offer specialized products and services tailored to the needs of local buyers.
It’s important for homeowners and buyers to shop around and compare rates from multiple lenders to ensure they are getting the best deal. Websites like Bankrate and LendingTree can be helpful resources for comparing rates and terms from multiple lenders. Homeowners and buyers should also consider working with a mortgage broker who can help them navigate the lending process and find the best mortgage product for their needs.
In conclusion, predicting mortgage rates in 2024 is not an exact science, but there are several factors that could impact rates. By staying informed about economic indicators, Federal Reserve policy, and local market trends, homeowners and buyers can make informed decisions about their mortgage. Shopping around and comparing rates from multiple lenders is key to ensuring you are getting the best deal on your mortgage. Whether you’re looking to refinance your existing mortgage or buy a new home, it’s important to stay informed and be proactive in managing your mortgage.
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