Mortgage rates drop, but not enough for priced-out homebuyers

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A real estate agent and prospective homebuyer in Coral Gables, Florida.

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Mortgage rates fell slightly last week, but not enough to fuel mortgage demand.

According to the Mortgage Bankers Association seasonally adjusted index, the total volume of mortgage applications fell 3.1% for the week.

The average contract rate for 30-year fixed-rate mortgages with corresponding loan balances ($ 548,250 or less) decreased from 3.17% to 3.15%, with points falling from 0.39 to 0.34 (including the lending fee) for loans with a decrease of 20% decreased payment.

Interest rates have fallen slightly, but not as low as the record levels last autumn, which is why the demand for refinancing has not responded. Refinance requests fell 5% last week and were 27% lower than a year ago. The refinancing share of mortgage activities fell from 61.3% in the previous week to 60.4% of the total applications.

“With fewer homeowners benefiting from lower interest rates, the refinancing rate has fallen to its lowest level since April,” said Joel Kan, associate vice president of economic and industry forecasting for MBA.

Home purchase mortgage applications were largely unchanged from the previous week and 24% lower than a year ago.

“The big annual decline was the result of comparing Memorial Day 2021 with a non-holiday week and the huge surge in applications last May when the pandemic-induced lockdowns began to be lifted,” Kan said.

It was also the result of sky-high house prices. Fewer buyers can now afford a home. This was shown in the average loan amount for purchase requests. It fell to $ 407,000, below the record high of $ 418,000 in February, but still well above the 2020 average of $ 353,900.