Mortgage demand is falling even if interest rates are falling

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Robin Azougi 1st R, a licensed real estate seller with Douglas Elliman Real Estate, speaks to prospective buyers at a home for sale in Floral Park, Nassau County, New York on September 6, 2020.

Wang Ying | Xinhua News Agency | Getty Images

Lower mortgage rates do not induce homeowners or potential homebuyers to contact their lenders because other obstacles stand in their way.

According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications decreased by 2.5% in the past week from the previous week.

The decline came despite the fact that the average contract rate on 30-year fixed-rate mortgages with corresponding loan balances ($ 548,250 or less) fell from 3.20% to 3.17%, with the points going from 0.36 to 0.30 (including the lending fee) for Loans decreased with 20% down payment. That is the lowest value since the end of February.

Home loan refinance requests, which are very sensitive to weekly interest rate changes, still fell 1% for the week, down 18% from a year ago. The rate on 30-year time deposits was 26 basis points higher a year ago, but last fall, interest rates were at record lows, far lower than the current rate.

“Even with interest rates a few weeks lower, most borrowers are likely to have funded themselves, so activity has declined in seven of the last eight weeks,” said Joel Kan, associate vice president of economic and industry forecasting for MBA.

Home purchase mortgage applications fell 5% in the week and were 34% higher than a year ago. The year-on-year comparison says little now, however, as the housing market stalled at this time last year when the pandemic lockdown was in place. In the summer it recovered dramatically and is only now losing momentum again.

In the competition for the record-low number of homes for sale, homebuyers are battling bidding wars. That causes House prices are skyrocketing at the fastest pace in 15 years. Even the slightly lower interest rates today are not enough to compensate for the constantly rising costs of buying your own home. Purchase requests have decreased in four of the last five weeks.

“While buyers were eager in early 2021, sellers held back,” said Danielle Hale, chief economist at realtor.com. “We saw 200,000 fewer new sellers than we would normally see in January and February, and an additional 117,000 new sellers were missing compared to the typical March year. These trends have resulted in exceptionally frustrating trends for buyers, especially first-time buyers. “

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