A drop in U.S. mortgage rates last week appeared to open the door for those who had purchases and refinancing on their new year’s resolutions list.
Purchases rose a whopping 25 percent on a seasonally adjusted basis from the previous period in the week ending Jan. 13, according to data from the Mortgage Bankers Association. The bump contributing to a rise in mortgage activity of 27.9 percent from the previous week.
Refinancings jumped 34 percent from the previous week as lower mortgage rates created a more favorable environment for homeowners who had little incentive to refinance only a few months ago. Rates remain almost double what they were this time a year ago, a culprit behind purchase applications remaining 35 percent below last year’s mark.
The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances dropped from 6.42 percent to 6.23 percent, while points increased from 0.73 to 0.67.
Mortgage rates are down nearly a full percentage point since the end of October, when they reached as high as 7.16 percent. The most recent average mortgage rate was the lowest since September.
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Purchase applications climb as mortgage rates stabilize
MBA chief economist Mike Fratantoni painted a rosy picture for those looking to become homeowners for the first time in the near future.
“As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” Fratantoni said.
The VA share of total applications decreased from 13.2 percent to 11.8 percent, while the USDA share remained at 0.6 percent. The FHA share also decreased from 13.4 percent to 11 percent.
The average contract interest rate for a 30-year, fixed-rate mortgage with a jumbo loan balance — greater than $647,200 — decreased slightly to 6.08 percent. The average contract interest rate for a 15-year, fixed-rate mortgage decreased more substantially to 5.58 percent.
For prospective homeowners, the expectation is it should be a better year on the mortgage front, after extremely low rates during the first couple of years of the pandemic gave way to higher rates as the Federal Reserve hiked interest rates. The Fed is expected to start slowing rate hikes in the coming months.