Potential homebuyers and a small number of current homeowners are attempting to capitalize on lower borrowing prices.
According to data issued Wednesday from the Mortgage Bankers Association’s Market Composite Index, a measure of mortgage loan application volume, mortgage applications increased 7.2% in the previous week on a seasonally adjusted basis.
Although applications increased during the last week, they remained significantly below levels seen a year ago, when borrowing rates were more than a percentage point lower than they are now, according to the MBA’s index.
Nonetheless, the increase in applications comes as the average long-term mortgage rate in the United States continues to fall for the second week in a row.
According to mortgage buyer Freddie Mac, the average rate on the benchmark 30-year home loan declined to 6.71% last week from 6.79%. The decrease comes after three consecutive weekly hikes, which drove the average rate to its highest level since early November, when it reached 7.08%.
A year ago, though, the 30-year fixed mortgage rate averaged 5.23%.
Due to the sustained high rates, applications to refinancing a loan increased by a small margin of 6% during the last week, accounting for less than one-third of all applications. According to the data, it was 41% lower than the same period last year.
“Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates,” Joel Kan, MBA’s vice president and deputy chief economist, said.
In fact, according to a recent Redfin report, more than 91% of U.S. homeowners with mortgages have an interest rate below 6%, giving them all the more reason to stay put.
Unfortunately, this is contributing to the shortage of new listings on the market.
“Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory, continue to constrain home buying activity in many markets,” Kan said.