US mortgage rates experienced their most significant weekly decline since August, falling to the lowest level since mid-October and prompting a surge in home purchase applications during the week encompassing the Thanksgiving holiday. This positive trend suggests a potential revival in the housing market as borrowing costs become more attractive.
According to data released Wednesday by the Mortgage Bankers Association (MBA), the average contract rate on a 30-year fixed-rate mortgage dropped 17 basis points to 6.69% for the week ending November 29th. This marked the largest weekly decrease since August and a welcome relief for prospective homebuyers.
The MBA’s index of home purchase applications saw a seasonally adjusted increase of 5.6%, reaching its highest point since the beginning of the year. While these figures can be volatile around the holiday season, the roughly 18% jump over the past two weeks indicates a notable upward trend. This surge in applications suggests that lower mortgage rates are incentivizing potential homebuyers to enter the market.
This decline in mortgage rates is largely attributed to falling Treasury yields, which have been decreasing in recent weeks amid expectations that the Federal Reserve will gradually lower its benchmark interest rate. Market expectations for a third consecutive rate cut at the Federal Reserve’s December 17-18 meeting have slightly improved, although several policymakers are maintaining a cautious approach and keeping their options open. The potential for further rate cuts could continue to exert downward pressure on mortgage rates.
In contrast to the positive momentum in home purchase applications, the MBA’s refinancing index declined for the ninth time in the past ten weeks, reaching its lowest level since May. This suggests that homeowners who refinanced at lower rates earlier are less inclined to do so now, even with the recent drop in rates.
The MBA survey, conducted weekly since 1990, gathers data from mortgage bankers, commercial banks, and thrifts, covering over 75% of all retail residential mortgage applications in the US. This broad coverage makes it a reliable indicator of mortgage market activity.
In conclusion, the recent drop in mortgage rates to their lowest point since mid-October has spurred a surge in home purchase applications, offering a glimmer of hope for the housing market. While the future trajectory of interest rates remains uncertain, the current environment of lower borrowing costs presents a favorable opportunity for prospective homebuyers. The coming weeks will be crucial in determining whether this positive trend can be sustained.
