Mortgage interest rates are expected to continue falling in December.
Demand for refinancing is on the rise again in the U.S. mortgage market, with applications up 14%. According to a CNBC report, this surge is due to the recent decline in mortgage rates, which fell to their lowest since August.
U.S. mortgage rates are approaching the 7% level again after a strong 8% rise last October. This decline has proven to be a catalyst for the refinance market, giving homeowners the opportunity to reexamine their mortgage contracts.
US mortgage refinancing demand rises 14%
According to the Mortgage Bankers Association (MBA), the average contract interest rate for a 30-year fixed-rate mortgage with matching loan balance fell from 7.37% last week to 7.17%. Points, including origination fees, fell from 0.64 to 0.60 for 20% down payment loans, the lowest since August, indicating a significant change in the lending environment.
In response to interest rate changes, refinance applications also increased by 14% compared to the previous week. Surprisingly, this figure is 10% higher than the same week a year ago.
Joel Kan, MBA’s vice president and associate economist, attributed the trend to slowing inflation and financial markets expecting the Fed’s rate hike cycle to end.
“The recent decline in interest rates is due to financial markets expecting a slowdown in inflation and the end of the Federal Reserve’s interest rate hike cycle. Refinance applications saw their strongest week in two months and increased year-over-year for two consecutive weeks for the first time since the end of 2021,” Kan said.
Mortgage application witness down 0.3%
It’s worth noting that despite the recent surge, overall refinance demand levels remain relatively low. Many borrowers took advantage of historically low interest rates early in the COVID-19 pandemic. The MBA vice president suggested that the recent increase could be a sign that 2023 is the low point in the refinancing activity cycle.
While refinance applications are increasing, the same cannot be said for mortgage applications to purchase a home, down 0.3% for the week.
By comparison, the number of such applications was 17% lower than the same week a year ago, as potential homebuyers in the United States continue to face the challenges of high prices and a shortage of homes for sale.
Mortgage rates are expected to continue to fall.
Mortgage interest rates are expected to continue falling in December. Matthew Graham, chief operating officer of Mortgage News Daily, said a weaker-than-expected report on hiring contributed to the trend. Graham emphasized that while the labor market was still ‘above trend’, faster cooling would have a positive impact on interest rates.
“The labor market has become too hot. Job postings are still ‘above trend,’ but cooling at a faster pace has a positive impact on interest rates,” Graham said.
Meanwhile, the soon-to-be-released monthly employment report could provide insights into economic conditions that could sustain or reverse this trajectory.
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