United States mortgage rates have hit their lowest level in four years, improving prolonged gains in refinancing but leaving homebuyers unimpressed.
Total mortgage applications have remained flat, rising only 0.4% compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances of $832,750 or less fell to its lowest level since September 2022.
It has fallen from 6.17% to 6.09%, with points falling to 0.53 from 0.56, including the origination fee, for loans with a 20% down payment.
Applications for refinancing a home loan increased 4% week-over-week and 150% year-over-year, when rates were 79 basis points higher.
While the comparisons to a year ago are quite large, it is important to note that refinancing was low at this time last year.
Applications for a mortgage to purchase fell 5% week-over-week but rose 12% from the same time last year.
Despite lower mortgage rates improving affordability, home prices are still slightly higher than they were at this time last year, and economic uncertainty is weighing heavily on consumers.
Redfin cited this uncertainty in a report showing that nearly 40,000 home sale agreements nationwide were cancelled in January, equal to 13.7% of homes that went under contract. That’s up from 13.1% a year ago and the highest January share in records dating to 2017.
Borrowers also sought more savings in adjustable-rate mortgages, which are slightly riskier but offer lower rates.
“The ARM share stayed above 8%, as ARM rates remained more than 80 basis points below conforming fixed rates,” MBA economist Joel Kan said in a release.
“This is giving payment-sensitive borrowers or those seeking larger loans, an incentive to choose this product offering.”
