Demand for mortgages picked up for the third week in a row last week as mortgage rates continued to retreat from 2022 highs, according to a weekly survey by the Mortgage Bankers Association.
The MBA’s Weekly Mortgage Applications Survey showed demand for purchase loans was up by a seasonally adjusted 3 percent last week compared to the week before but was down 41 percent from a year ago. Requests to refinance were up 2 percent week over week, but down 86 percent from a year ago.
The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year. As a result of the drop in mortgage rates, both purchase and refinance applications picked up slightly last week.
The Optimal Blue Mortgage Market Indices, which are updated daily, show rates for 30-year fixed-rate loans averaged 6.58 percent on Tuesday, down 58 basis points from a 2022 high of 7.16 percent on Oct. 24.
At 6.63 percent, rates for jumbo mortgages not eligible for purchase by Fannie Mae and Freddie Mac were also down from a Nov. 4 peak of 7.20 percent. For the week ending Nov. 18, the MBA reported average rates for the following types of loans: - For 30-year fixed-rate conforming mortgages (loan balances of $647,200 or less), rates averaged 6.67 percent, down from 6.90 percent the week before. Although points increased to 0.68 from 0.56 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate decreased to 6.87 percent.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $647,200) averaged 6.30 percent, down from 6.51 percent the week before. Although points increased to 0.74 from 0.64 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 6.52 percent.
- For 30-year fixed-rate FHA mortgages, rates averaged 6.66 percent, down from 6.93 percent the week before. Although points increased to 1.01 from 0.99 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 6.96 percent.
- Rates for 15-year fixed-rate mortgages averaged 6.08 percent, down from 6.27 percent the week before. With points decreasing to 0.70 from 0.73 (including the origination fee) for 80 percent LTV loans, the effective rate decreased to 6.25 percent.
- For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.78 percent, up from 5.73 percent the week before. With points increasing to 0.73 from 0.65 (including the origination fee) for 80 percent LTV loans, the effective rate increased to 6.05 percent.
Forecasters expect mortgage rates will continue to fall
Forecasters expect mortgage rates will continue to fall as the Federal Reserve winds down an aggressive campaign to fight inflation by raising short-term interest rates. Fannie Mae forecasters are expecting a modest recession next year and a slow, steady decline in mortgage rates over the next two years, with rates for 30-year fixed-rate loans dropping below 6 percent in late 2024.
Economists at the Mortgage Bankers Association are forecasting a more severe pullback, with 30-year fixed-rate loans retreating below 6 percent next spring and averaging 4.4 percent in the second half of 2024.
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