Mortgage applications continued their downward swing last week, but lower rates are sparking activity in the refinancing market.
Applications declined 1.9 percent from a week earlier, the Mortgage Bankers Association revealed on Wednesday. The reduced interest levels for the week ending Dec. 2 came even as mortgage rates continued to slip, down 73 basis points from a month ago.
The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances dropped from 6.49 percent to 6.41 percent, while points also decreased from 0.68 to 0.63.
Purchase activity slowed, declining by 3 percent from the previous week and reported down 40 percent year-over-year.
But refinancings emerged from the tank they’ve been submerged in during a higher rate environment, jumping 5 percent from the previous week. The figures were still down 86 percent from last year, when mortgage rates were roughly half of what they are today.
The refinance share of mortgage activity also increased. Refinancings accounted for 28.7 percent of mortgage activity last week, an increase from 26.1 percent from a week earlier.
Only a week ago, refinancings and the refinancing share of mortgage applications were at turn-of-the-century lows.
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Mortgage rates’ tie to demand is fickle, but continued declines could draw back buyers discouraged from buying homes by rising rates and elevated home prices. Rates started surging from record lows in the spring after the Federal Reserve took decisive action to raise interest rates in an effort to tame inflation.
The VA share of total applications increased from 11.2 percent to 11.4 percent, while the USDA share increased to 0.6 percent from 0.5 percent from last week. The FHA share also increased from 12.2 percent to 13.7 percent.
The average contract interest rate for a 30-year, fixed-rate mortgage with a jumbo loan balance — greater than $647,200 — dropped to 6.08 percent. The average contract interest rate for a 15-year, fixed-rate mortgage decreased to 5.84 percent.