The new year is bringing fresh momentum to the mortgage market as homebuyers seize on lower rates.
Purchase-loan applications rose 9 percent on a seasonally adjusted basis from the previous week for the period ending on Jan. 12, according to the Mortgage Bankers Association’s weekly survey. The group’s refinancing index also rose from the previous week, jumping 11 percent.
Both measures were supported by another drop in mortgage rates, which have fallen for three straight weeks. The contract rate on the average 30-year fixed-rate mortgage with conforming loan balances ($726,200 or less) fell by six basis points to 6.75 percent and is down by more than 100 basis points from its peak in the fall.
The refinancing index last week was up 10 percent from a year earlier, but the purchase index was 20 percent lower as home sales and listings remain low.
The association is “cautiously optimistic that home purchases will pick up in the coming months,” MBA deputy chief economist Joel Kan said in a statement, adding the week-to-week activity increase was “heavily driven by the conventional market.”
The refinancing share of total activity fell from 38.3 percent the prior week to 37.5 percent last week. The FHA share of applications dropped from 14.4 percent to 14.3 percent, while the VA share saw an even greater downturn, falling from 16.3 percent to 14.2 percent.
The average contract interest rate for a 30-year rate with jumbo loan balances decreased 12 basis points to 6.86 percent, while the average contract interest rate for a 15-year fixed-rate mortgage fell from 6.41 percent to 6.24 percent.
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If mortgage rates continue to ease, more homebuyers will be able to get off the sidelines and back into the housing market, even with remaining obstacles of low for-sale inventory and high home prices.
The decline in rates “has breathed optimism into the housing sector,” analyst Jonathan Miller told The Real Deal earlier this month.
“The outlook is, standing here today and standing here a year from now, rates are expected to be lower, and two years from now even lower,” Miller said.