The sharp increase in mortgage rates in the second half of 2022 made the headlines as the Federal Reserve Bank used interest rate hikes as its primary means to fight back against inflation.
The increase was deeply felt by house hunters who were already struggling with sky-high property prices. In addition, mortgage rates have been sitting near historic lows for the past couple of years, contributing to the general sticker shock. In October 2022, the average mortgage rate for a 30-year home loan climbed above 7% for the first time since April 2022. As the cost of borrowing money soared, many would-be homebuyers have found themselves pushed to the sidelines. However, if last week’s mortgage application numbers are any indication, house hunters are still actively looking to buy despite the adverse conditions.
The 30-year fixed-rate mortgage dropped to 6.15% for this week, according to Freddie Mac’s Primary Mortgage Market Survey, down from 6.33% the previous week, making it its lowest level since September. Homeowners who were considering refinancing and homebuyers in the starting blocks jumped on the occasion.
Quick Reaction to Drop in Rates
According to the Mortgage Bankers Association, the drop contributed to a rise in mortgage activity of 27.9% from the previous week. Purchased money loans rose by a whopping 24.7% on a seasonally adjusted basis from the previous period, while refinancings jumped 34% from the previous week.
According to MBA chief economist Mike Fratantoni, such numbers are encouraging signs for the housing market in the months ahead: “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” he said.
Joel Kan, MBA deputy chief economist adds this observation about the new home market, “This week’s builder sentiment index from the NAHB reflected an improving outlook and increased buyer traffic, as mortgage rates have backed off from recent highs. “The housing market is still in need of more starter and entry-level homes, especially when current demographic trends point to the potential for more younger households to enter homeownership in the near future. New construction of these units will help these buyers entering the housing market.”
All in all, it was a much better week for the housing market. If you’d like more information about buying/selling or refinancing in today’s market, give us a call or drop us an email.
