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Applications for purchase mortgages surged last week as mortgage rates hit their lowest levels in two months, with rates continuing to trend down this week as bond market investors digest data that shows inflation cooling.

Requests for purchase loans were up by a seasonally adjusted 4 percent last week compared to the week before, but down 20 percent from the same time a year ago, according to a weekly survey of lenders by the Mortgage Bankers Association.

Joel Kan

“U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation,” MBA Deputy Chief Economist Joel Kan said in a statement. “Most mortgage rates in our survey decreased, with the 30-year fixed mortgage rate decreasing to 7.41 percent, the lowest rate in two months. Mortgage applications increased to their highest level in six weeks, but remain at very low levels.”

Applications to refinance were up 2 percent from the week before, but down 4 percent from a year ago. Demand for refinancing “continues to be well below historical averages, given that most borrowers already have a rate well below current market rates,” Kan said.

Mortgage rates registered their biggest one-day drop in nearly four years on Nov. 14 after the Bureau of Labor Statistics reported that the all-items Consumer Price Index (CPI) fell to 3.2 percent in October, down from 3.7 percent in September.

Yields on 10-year Treasury notes, a barometer for mortgage rates, trended up slightly on Tuesday after publication of the minutes from the Federal Reserve’s Nov. 1 meeting. The minutes suggested that while Fed policymakers may be done raising rates, they are in no hurry to bring them back down.

Mortgage rates continue retreat from peaks

But mortgage rates continued to trend down this week, with 30-year fixed-rate mortgages averaging 7.28 percent Tuesday, a 55 basis-point drop from a 2023 peak of 7.83 percent on Oct. 25, according to daily rate lock data tracked by Optimal Blue.

The latest jobless claims report from the Labor Department, which showed initial claims for unemployment dropping by 24,000 last week, to 209,000, was also putting pressure on 10-year Treasury yields Wednesday.

The CME FedWatch Tool, which tracks futures markets to predict the odds of the Fed’s next move, showed investors saw only a 5 percent chance on Wednesday that the central bank will hike rates again at its final meeting of the year on Dec. 13. But that’s up from 0 percent on Tuesday.

Kieran Clancy

“The steep drop in jobless claims contrasts with the accelerating uptrend of recent weeks, with claims hitting a 12-week high a week prior,” Pantheon Macroeconomics Senior U.S. Economist Kieran Clancy said in a note to clients Wednesday. “One undershoot is not enough to determine if the rising trend in claims is starting to flatten. That said, leading indicators suggest claims will level off again soon. Layoff announcements and WARN notices—the best near-term leading indicators of jobless claims—have risen from their summer lows, but aren’t clearly trending higher.”

The average loan request on purchase applications was $403,600, the lowest since January 2023, Kan said, “consistent with other sources of home sales data showing a gradually increasing first-time homebuyer share.”

Existing-home sales fell 4.1 percent in October to a seasonally adjusted annual rate of 3.79 million, the lowest month for sales since August 2010, according to data released Tuesday by the National Association of Realtors.

According to NAR, first-time buyers accounted for 28 percent of October sales, up from 27 percent in September but unchanged from a year ago.

“The back-up in rates from early August to late October delivered a fresh blow to mortgage applications, but rates have since fallen and applications have rebounded somewhat since the start of this month,” Clancy said in a note to clients. “Existing home sales may well fall a little further in November, but the recent trends in mortgage applications suggest that sales will be rising again by year-end, albeit gradually.”

For the week ending Nov. 17, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 7.41 percent, down from 7.61 percent the week before. With points decreasing to 0.62 from 0.67 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 7.51 percent, down from 7.65 percent the week before. With points decreasing to 0.62 from 0.67 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 7.19 percent, down from 7.36 percent the week before. With points decreasing to 0.79 from 0.85 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • Rates for 15-year fixed-rate mortgages, popular with homeowners who are refinancing, averaged 6.89 percent, down from 6.94 percent the week before. With points decreasing to 0.76 from 1.00 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.76 percent, up from 6.65 percent the week before. With points increasing to 0.82 from 0.72 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

Requests for ARM loans fell to 8.3 percent of total applications, while applications to refinance accounted for 32.4 percent of loan requests.

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Email Matt Carter

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