The verdict is in — the old way of doing business is over. Join us at Inman Connect New York Jan. 23-25, when together we’ll conquer today’s market challenges and prepare for tomorrow’s opportunities. Defy the market and bet big on your future.
Falling mortgage rates prompted more prospective homebuyers to apply for a mortgage last week, a trend that could bode well for the spring homebuying season, the Mortgage Bankers Association (MBA) said Wednesday.
The MBA’s latest Weekly Mortgage Applications Survey showed applications for purchase mortgages were up by a seasonally adjusted 9 percent last week compared to the week before, but down 20 percent from a year ago. Requests to refinance jumped 11 percent week over week, and were also up 10 percent from a year ago.
Joel Kan
“Although purchase activity is lagging year-ago levels, refinance applications have improved from their recent low point and have been showing year-over-year gains, albeit at low levels,” MBA Deputy Chief Economist Joel Kan said in a statement. “If rates continue to ease, MBA is cautiously optimistic that home purchases will pick up in the coming months.”
Whether mortgage rates will continue to ease is the million dollar question, and a new Commerce Department report showing strong retail sales in December could put a stake through the heart of any hopes the Federal Reserve will start cutting rates in March.
At $709.9 billion, retail and food services sales were up a seasonally adjusted 0.6 percent from November and 5.6 percent from a year ago, the Commerce Department reported. That’s well above many economists’ expectations.
“Further upside surprises in the consumption data would make it more likely, at the margin, that the Fed delays its first rate cut until May,” economists at Pantheon Macroeconomics said in a note to clients. “For now, we’re sticking to our call that easing will begin in March, because we think policymakers will put much more emphasis on the inflation data, where we see significant scope for further downside surprises.”
The CME FedWatch Tool, which tracks futures markets to calculate the probability of the Fed’s next moves, shows investors are still pricing in better-than-even (57 percent) odds that the Fed cuts rates in March, down from 67 percent last week.
In a speech delivered at the Brookings Institution Tuesday, Federal Reserve Governor Christopher Waller said he believes the Fed will be able to lower rates this year, but shouldn’t be in a rush to do so.
“When the time is right to begin lowering rates, I believe [the federal funds rate] can and should be lowered methodically and carefully,” Waller said. “In many previous cycles, which began after shocks to the economy either threatened or caused a recession, the [Fed policymakers] cut rates reactively and did so quickly and often by large amounts. This cycle, however, with economic activity and labor markets in good shape and inflation coming down gradually to 2 percent, I see no reason to move as quickly or cut as rapidly as in the past.”
Mortgage rates resume decline
At 6.60 percent Tuesday, rates on 30-year fixed-rate conforming mortgages were not far above a recent low of 6.56 percent registered on Dec. 27, and remained a full percentage point lower than the 2023 peak of 7.83 percent registered Oct. 25, according to loan lock data collected by Optimal Blue.
For the week ending Jan. 12, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $766,550 or less), rates averaged 6.75 percent, down from 6.81 percent the week before. Although points increased to 0.62 from 0.61 (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 $766,550) averaged 6.86 percent, down from 6.98 percent the week before. With points decreasing to 0.42 from 0.43 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 30-year fixed-rate FHA mortgages, rates averaged 6.46 percent, down from 6.56 percent the week before. With points decreasing to 0.80 from 0.84 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- Rates for 15-year fixed-rate mortgages averaged 6.24 percent, down from 6.41 percent the week before. Although points increased to 0.59 from 0.55 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.14 percent, down from 6.17 percent the week before. Althoug points increased to 0.68 from 0.56 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
Government-backed mortgages accounted for 29 percent of all mortgage applications, with FHA (14.3 percent) and VA (14.2 percent) taking the biggest share of applications.
Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.