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Mortgage Demand Rises as Buyers Take Advantage of Lower Rates


# Mortgage Demand Rises as Buyers Take Advantage of Lower Rates

The Numbers: Mortgage demand has experienced a modest increase, reaching the highest weekly pace in five weeks. This surge in demand comes as buyers seize the opportunity presented by a dip in mortgage rates.

Although rates have remained unchanged over the past week, the 30-year rate has dropped by 30 basis points in comparison to three weeks ago.

These relatively lower rates have provided a boost to both home-buying and refinancing demand. The Mortgage Bankers Association (MBA) revealed that the overall market composite index, which serves as a measure of mortgage application volume, has risen in the latest week.

In specific terms, the market index experienced a 2.8% increase, reaching a value of 165.9 for the week ending November 10. To put this into context, it is important to note that a year ago, the index stood at 170.5.

Key Details

Home-buying and refinancing activity have shown a significant rise due to the lower mortgage rates.

Buyer demand has increased substantially as buyers view this rate dip as an opportunity. The purchase index, which measures mortgage applications for the purchase of a home, witnessed a notable 3.3% increase compared to the previous week.

Refinancing activity has also seen a slight rise, with the refinance index increasing by 2%.

Breaking down the different rates, the average contract rate for a 30-year mortgage for homes sold at $726,200 or less maintained its stability at 7.61% for the week ending November 10, according to the MBA.

In contrast, the rate for jumbo loans, which are 30-year mortgages for homes sold for over $726,200, experienced a slight increase from 7.58% to 7.65% in the previous week.

Furthermore, the average rate for a 30-year mortgage backed by the Federal Housing Administration remained unchanged at 7.36%.

Meanwhile, the 15-year mortgage rate decreased from 6.98% to 6.94% compared to the previous week.

This continuous rise in mortgage demand reflects the responsiveness of buyers to favorable market conditions, particularly the lower rates. As we move forward, it is important to monitor how these trends will shape the future of the housing market.

# Falling Rates for Adjustable-Rate Mortgages

The rate for adjustable-rate mortgages (ARMs) has recently decreased to 6.65%, down from last week’s 6.76%. This decline in rates has led to a decrease in the percentage of ARMs among all mortgage applications, dropping from 9.8% to 8.8% last week.

Economic Outlook: Further Rate Reductions Expected

Looking ahead, it is anticipated that rates will continue to decrease in the coming weeks. The October inflation report indicates a slowdown in the growth of consumer prices, which suggests that rates will fall even further. Additionally, if the economy continues to weaken, the U.S. Federal Reserve is likely to refrain from raising interest rates, given that the current monetary policy has already had a significant impact on slowing down the economy.

Potential Turning Point for the Mortgage Market

Despite the recent decline in rates, there is still a pent-up demand from aspiring homeowners. This increase in applications could potentially mark a turning point for the mortgage market. However, it is worth noting that lenders have been facing financial losses, with each loan they originate resulting in a loss of $1,015 during the third quarter of this year, according to a separate report by the MBA (Mortgage Bankers Association).

Insights from the MBA

Joel Kan, deputy chief economist and vice president at the MBA, acknowledged that both purchase and refinance applications have increased to their highest weekly pace in five weeks. However, despite this uptick, application levels remain comparatively low. Kan highlighted that current mortgage rates are still challenging for many prospective homebuyers and existing homeowners.

Market Reaction: 10-Year Treasury Yield

In early morning trading on Wednesday, the yield on the 10-year Treasury note (BX:TMUBMUSD10Y) was below 4.5%. This market reaction reflects the ongoing trend of declining rates.

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