Relief for buyers as mortgage rates decline

Drop to 7.18% breaks streak of four straight gains: MBA

Relief for Buyers as Mortgage Rates Decline

(Photo Illustration by The Real Deal with Getty)

The Federal Reserve hasn’t cut interest rates, but that didn’t stop mortgage rates from falling last week.

The average contract interest rate for a 30-year fixed-rate mortgage with a conforming loan balance dropped to 7.18 percent for the week ending on May 3, according to the weekly Mortgage Bankers Association survey. The decline broke a streak of four consecutive mortgage rate increases as it dropped 11 basis points.

Purchase-loan applications increased 2 percent on a seasonally adjusted basis from the previous week. On an unadjusted basis, the index rose 2 percent as well from the previous week, but was 17 percent below last year’s activity.

The refinancing index, meanwhile, increased 5 percent from the previous week, but was down 6 percent year-over-year.

Recent reports of slowing job growth may motivate the Fed to cut interest rates in the coming months, after rapid inflation prompted steady rate hikes, sending mortgage rates up in tandem.

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“Treasury rates and mortgage rates fell last week on the news of a slowing job market, with wage growth at the slowest pace since 2021, and the Federal Reserve’s announced plans to ease quantitative tightening in June and to maintain its view that another rate hike is unlikely,” MBA chief economist Mike Fratantoni said in a statement.

As buyers and homeowners attempt to navigate the roller coaster ride of mortgage rates, eyes will remain trained on smoke signals coming out of the Fed.

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The refinancing share of total activity increased from 30.2 percent the prior week to 30.6 percent last week. The FHA share of applications increased from 12.7 percent to 12.9 percent, while the VA share increased from 11.3 percent to 11.7 percent and the USDA share held at 0.4 percent.

The average contract interest rate for a 30-year rate with jumbo loan balances (greater than $766,550) decreased eight basis points to 7.31 percent, while the average contract interest rate for a 15-year fixed-rate mortgage fell from 6.74 percent to 6.6 percent.