Interest rates on mortgage loans have dipped to their lowest level in almost 15 months, with mortgage applications increasing in tandem.
“The decline in mortgage rates does increase prospective homebuyers’ purchasing power and should begin to pique their interest in making a move,” Khater stated.
“Additionally, this drop in rates is already providing some existing homeowners the opportunity to refinance, with the refinance share of market mortgage applications reaching nearly 42 percent, the highest since March 2022.”
Mortgage application volume also hit its highest level since January, Joel Kan, the association’s deputy chief economist, said.
Mortgage rates declined following “doveish communication” from the Federal Reserve regarding interest rates and a “weak jobs report,” he noted.
Although overall mortgage applications increased, applications for purchasing homes saw “small gains,” while refinance applications surged across all loan types, Kan said.
Interest Rates, Rising Buyer Interest
A key determinant of whether the current decline in mortgage rates will continue or not is the federal interest rates. Since June, the Fed has kept interest rates in a range of 5.25 percent to 5.50 percent. For mortgage rates to come down significantly, the Fed’s interest rate must first decline.“Many of the buyers I’m working with are excited because they’ve been casually house hunting for a year, waiting for rates to come down before they make an offer. Now, a lot of those buyers want to get in now, before rates get too low and cause more competition,” Redfin Premier agent Shoshana Godwin said.
“One of my listings, which went on the market last week, had over 100 parties come through and received nine offers. Buyers are securing lower rates than they were a few months ago, but costs are still high enough that buyers are picky.”
In June, a buyer could expect to pay $2,303 per month—almost double the amount from 2021—for a median-priced existing single-family home. During this period, mortgage payment as a percentage of income jumped from 16.9 to 26.8 percent.
Higher monthly payments and the need to set aside a higher percentage of income for homes are major deterrents for buyers.