Weekly mortgage demand rose more than 14% as interest rates hit two-year lows

Mortgage rates fell again last week, and with expectations that they could drop further, demand for mortgages suddenly jumped, especially for refinances.

The Federal Reserve is expected to cut interest rates for the first time in four years on Wednesday, and mortgage rates don't exactly follow the Fed, they're influenced by policy. After the decision, they are likely to move on to Fed Chairman Jerome Powell's comments.

“The most important takeaway is that lower mortgage rates are not even remotely guaranteed [the] The Fed cut rates. “They're actually already baked in. Things could go either way and the volatility could be significant,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.

Total mortgage applications rose 14.2% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Last week's results included an adjustment for the Labor Day holiday.

The average contract interest rate for a 30-year fixed-rate mortgage with a loan balance of $766,550 or less fell from 6.29% to 6.15%, including an origination fee with a 20% down payment, up from 0.55 to 0.56 points. This is the lowest rate since September 2022 and 116 basis points lower than the same week a year ago.

“Application activity picked up significantly last week, as market expectations of a rate cut from the Fed
“Mortgage rates are pulling lower,” said Joel Kahn, an economist at the Mortgage Bankers Association.

A home loan refinance application was up 24% from the previous week and 127% higher than the same week a year ago. Most of these applicants likely bought their homes in the last two years, when rates rose sharply from the record lows seen in the first two years of the Covid-19 pandemic. Even with this large jump in volume, it is coming from a very low base, as most borrowers have interest rates below 5%. From 2022, both conventional and government activity jump to a faster pace of refinancing.

Applications for mortgages to buy a home rose 5% for the week but were still down 0.4% from the same week a year ago.

“It is notable that conventional procurement applications increased at a pace compared to last year, bringing overall procurement applications very close to year-ago levels,” Kahn said. “Homebuyers are seeing improving affordability conditions, thanks to lower rates and slower home prices.”