The numbers: U.S. mortgage demand rose modestly to the highest weekly pace in five weeks as buyers jumped on a dip in rates.
Rates were unchanged over the last week, but the 30-year rate is 30 basis points lower than three weeks ago.
Relatively lower rates provided a boost to buying and refinancing demand. The overall market composite index — a measure of mortgage application volume — rose in the latest week, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index rose 2.8% to 165.9 for the week ending Nov. 10 from a week earlier. A year ago, the index stood at 170.5.
Key details: Home-buying and refinancing activity rose on the back of lower rates.
Buyer demand increased as buyers considered the dip to be an opportunity. The purchase index — which measures mortgage applications for the purchase of a home — rose 3.3% from last week.
Refinancing activity also rose slightly. The refinance index increased by 2%.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.61% for the week ending Nov. 10. That’s unchanged from the week before, the MBA said.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.65%, up from 7.58% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was unchanged at 7.36%.
The 15-year fell to 6.94% from 6.98% from the previous week.
The rate for adjustable-rate mortgages fell to 6.65% from last week’s 6.76%. ARMs now comprise 8.8% of all applications, down from 9.8% last week.
The big picture: Rates will likely fall further in the coming weeks, as the October inflation report indicated that the growth in consumer prices is slowing. If the economy continues to weaken, rates will drop further as the U.S. Federal Reserve will likely back off from hiking interest rates since its current monetary policy has slowed the economy sufficiently.
Given the pent-up demand from aspiring homeowners, the increase in applications is likely to continue, in that case, which could be a turning point for the mortgage market. A separate MBA report noted that lenders lost $1,015 on each loan they originated in the third quarter of this year.
What the MBA said: “Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels,” Joel Kan, deputy chief economist and vice president at the MBA, said in a statement.
“Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners,” he added.
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was below 4.5% in early morning trading Wednesday.
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