A dip in mortgage interest rates is spurring demand from homebuyers, according to a new report from the Mortgage Bankers Association.
Mortgage applications last week jumped 28% from the week prior, according to seasonally adjusted data. The bankers association’s refinance index also spiked 34% from the previous week.
“As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers,” Mortgage Bankers Association Chief Economist and Senior Vice President Mike Fratantoni said in a Wednesday statement.
The report noted that mortgage rates are at their lowest level since September. The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances ($726,200 or less) was 6.23% last week, down from 6.42% the week prior.
Despite the gains, the housing market is still feeling the effects of The Federal Reserve’s interest rate hikes, which have dampened housing market activity. Purchase volume remained 35% below levels from the same period last year and the refinance index was 81% lower than the same week in 2022, according to the bankers association.
The bankers association’s survey has been conducted weekly since 1990 and covers over 75% of all U.S. retail residential mortgage applications.
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Also Wednesday, the National Association of Home Builders reported that builder confidence for newly built single-family homes in January rose to 35 thanks to “a modest drop in interest rates.”
The figure is low enough to indicate that more builders view conditions as poor (any number over 50 indicates more builders view conditions as good), but the four-point jump puts an end to a yearlong decline in confidence levels.
“It appears the low point for builder sentiment in this cycle was registered in December,” National Association of Home Builders Chairman Jerry Konter said in a Wednesday statement. “The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023.”