Weekly Mortgage Refinance Rates Spike After Rate Drop Signaling Persistent Demand
Mortgage applications to purchase a home rose 8% last week while the average loan size for purchase applications dropped to its lowest level since January.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 3.09% to 3.15% when buyers provided a 20% downpayment, CNBC reported.
Recent weeks have also shown a sudden decrease overall in short- and intermediate-term interest rates. The 10-year U.S. Treasury notes fell from 1.47% on June 30 to close at 1.29% on July 7, Forbes reported. Such volatility in bond markets is not ordinary, Forbes added.
One explanation for falling interest rates could be an actual transitory state of inflation as the Fed has predicted. This could be a correction for higher rates earlier in the year. It is also likely that the most recent jobs report, which showed a slight increase in unemployment claims, suggests slower economic growth than originally expected.
The primary sector that seems to be steaming ahead though is the housing market. The dip in rates caused existing homeowners to pounce on opportunities to refinance their mortgages in a market that is still ripping hot.
Declining Treasury yields have worried investors about the pace of economic growth, with CNBC citing the new COVID-19 Delta variant as a possible cause. Joel Kan, associate vice president of economic and industry forecasting for The Mortgage Banker’ Association told CNBC that mortgage rates fell for the second consecutive week as a result of falling rates with the 30-year fixed-rate hitting 3.09% — its lowest level since February 2021. He also added that there may have been a delayed spillover of applications from the previous week when rates decrease but there was not much response from banks in refinance applications.
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Homeowners refinance their mortgages when rates drop to save money on their monthly payments. In this particular market, it benefits homeowners even more so. Historically high home prices and persistent demand mean that existing homeowners can strike to refinance when rates are low, then sell tier homes for a larger net profit margin.
If you are looking to sell your home, it could be a good idea to take advantage of these low rates and attempt a refinance while you can. It is still very much so a seller’s market and the reconfiguration of your loan could pay off big in the end.
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