Home World A sharp drop in mortgage rates does little to boost demand

A sharp drop in mortgage rates does little to boost demand


A home for sale in the Mission Hills area of ​​Los Angeles, Tuesday, October 11, 2022 in Mission Hills, California.

Brian Van Der Brugh | Los Angeles Times | Getty Images

According to the Mortgage Bankers Association’s seasonally adjusted index, mortgage applications rose 2.7% from the previous week. An additional adjustment was made for Veteran’s Day.

The slight rise followed a government report last week that showed inflation may be starting to ease. This, in turn, led to a sharp drop in bond yields and mortgage rates. Thursday marked the sharpest one-day drop in the average 30-year fixed mortgage rate since daily tracking began in 2009.

The weekly average rate for 30-year fixed-rate mortgages with a matching loan balance ($647,200 or less) fell to 6.9% from 7.14%, with scores falling to 0.56 from 0.77 (including issuing commission) for loans with a 20% down payment.

According to a separate survey by Mortgage News Daily, the daily rate fell by 60 basis points on Thursday alone.

The number of applications for home loan refinancing decreased by 2% for the week and was 88% less than in the same week a year ago. The rate cut came at the end of the week, and Friday was the federal holiday, Veterans Day, so demand for refinancing may not have fully responded to the rate drop yet.

Home mortgage applications, which don’t usually respond quickly to changes in interest rates, rose 4% for the week and were 46% lower than the same week a year ago.

“The number of purchase applications increased across all loan types, and the average purchase loan amount fell to its lowest amount since January 2021,” said Joel Kahn, an economist at the Mortgage Bankers Association.

Loan sizes may also shrink due to falling home prices or potentially more first-time buyers entering the entry-level market.

Mortgage rates haven’t moved much since earlier this week, but yields in the U.S 10-year treasury fell on Tuesday, the first morning after the monthly U.S. producer price readings rose at a slightly slower-than-expected pace.

They later fell further, hitting near six-week lows after the news broke missiles hit Poland, two people died. This raised fears of greater political risk in an already war-torn region. Mortgage rates are marginally in line with 10-year Treasury yields.

A big drop in bond yields affects mortgage rates

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