The recent drop in mortgage rates to the lowest level since April has not made it any easier for buyers to afford homes in today’s housing market. Despite this drop, mortgage demand has only seen a marginal increase. According to the Mortgage Bankers Association, total mortgage application volume went up by a mere 0.5% from the previous week. The average contract interest rate for 30-year fixed-rate mortgages also saw a slight decrease, but buyers are still facing challenges in the market.
Applications to refinance home loans, which are more sensitive to weekly rate changes, saw a 5% increase for the week and were 7% higher than the same week last year. This was mainly due to the decline in mortgage rates for the second consecutive week. However, the overall level of refinance activity is still low. Despite the small boost, the challenges for home buyers persist.
On the other hand, applications for a mortgage to purchase a home actually fell by 2% for the week and were 14% lower than the year-earlier period. The decline was primarily driven by a 9% drop in FHA applications, which are favored by first-time or lower income buyers due to their smaller down payment requirements. Although mortgage rates have moved slightly lower recently, they are still considerably higher than they were a year ago, making it difficult for buyers to enter the market.
As mortgage rates continue to fluctuate, all eyes are now on the upcoming monthly consumer price index report set to be released on Wednesday. This report will provide another look at inflation and could influence the next move from the Federal Reserve on interest rates. With forecasts already indicating an expected increase in core prices, there is a sense of uncertainty in the market. The challenges faced by home buyers are not expected to disappear anytime soon, especially with the tight inventory and high mortgage rates.