Mortgage demand climbed last week following a second consecutive week of interest rate drops, according to data released by the Mortgage Bankers Association (MBA) on Wednesday.
The MBA’s Market Composite Index, a measure of mortgage loan application volume, showed a 7.2 percent increase from a week earlier, as the average 30-year fixed-rate mortgage fell to 6.77 percent.
But even after the small decline, rates are up substantially from the same time last year.
“Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain homebuying activity in many markets,” MBA Vice President and Deputy Chief Economist Joel Kan said in a statement.
“The average loan size on a purchase loan decreased for the third straight week, as we continue to see more first-time homebuyer activity in the purchase market,” he added.
Meanwhile, the refinance share of mortgage applications jumped by 6 percent from a week earlier, although it was down by more than 40 percent compared to a year earlier.
“Refinance applications accounted for less than a third of all applications and remained more than 40 percent behind last year’s pace,” Kan wrote.
“Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates,” he continued.
Buyers could see relief in the coming weeks, should the Federal Reserve pause its series of interest rate hikes that were meant to curb inflation.
Inflation data released Tuesday showed that annual growth dropped to its slowest pace since 2021, which some economists say gives the Fed room to pause its hikes to evaluate progress.
“It is likely the [Federal Open Market Committee] will see enough progress here to warrant skipping a rate hike at its meeting this Wednesday in order to get a better read on the lagged impact of its significant tightening thus far, Jason Pride, chief of investment strategy and research at Glenmede said in a statement.
“With that said, another rate hike at its July session remains the base case, particularly if the outlook for price stability remains unanchored from the Fed’s longer-term targets,” Pride concluded.