Consumers were not impressed by the recent decrease in mortgage rates. According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage application volume increased only 0.9% from the previous week.
Reduction in Mortgage Rates
The average interest rate for 30-year fixed-rate mortgages with conforming loan balances has decreased to 6.94% from 7.02%. This was followed by a decrease in points to 0.61 from 0.65 for loans with a 20% down payment, the lowest rate since March.
Mike Fratantoni, MBA’s SVP and chief economist, said that mortgage rates have decreased after the inflation data and last week’s FOMC meeting.
Despite the decrease in rate, refinance demand decreased by 0.4% for the week but was 30% higher than last year. Rates have remained slightly higher than a year ago.
Mortgage applications to purchase a home increased 2% for the week but were 12% lower than the same week last year. Home sales have slowed recently due to volatile interest rates, and the supply of homes for sale remains both limited and expensive.
Fratantoni added that purchase volume is still over 10% behind last year’s pace, but MBA expects home sales to pick up for the rest of the year as more inventory becomes available.
Mortgage rates initially went up this week but fell on Tuesday after weaker-than-expected retail sales data.
Opinions from Experts
Lower mortgage rates are being supported by some specific economic indicators, according to HousingWire Lead Analyst Logan Mohtashami. These include a decrease in the 10-year Treasury yield, down from 4.61% on May 29 to 4.24% on June 13. The spread between the 30-year and 10-year mortgage rates has also narrowed.
In addition to lower borrowing costs, prospective homebuyers are benefiting from increased listings. Altos Research data shows that national for-sale inventory grew by 1.5% in the week ending June 14, reaching its peak for 2024 with over 620,000 homes. For comparison, inventory in mid-June 2023 was less than 452,000 homes.
Mohtashami noted that if mortgage rates continue to go down and the demand increases, their active inventory buffer will be much stronger compared to 2022 and 2023. He added that he has observed that inventory should ideally show weekly numbers between 11,000 to 17,000 as long as rates stay above 7.25%. This has been seen three times this year whereas such cases were not present last year.
Melissa Cohn, a regional vice president for William Raveis Mortgage based in Florida, said last week that the Federal Reserve’s updated dot plot looked more hawkish than expected. She added that 10 out of 19 officials projected three rate cuts for the year in March. This is important as it was reported that 11 out of 19 officials predicted one rate cut or fewer last week.
Cohn said they are now focused on watching the data. The Fed’s comments and dot plot did not contain major surprises. He added that he expects just one rate cut to be neutral for the markets, and the Fed’s future actions will hinge on market conditions.
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