The numbers: Mortgage demand rose as rates fell sharply on the back of signs of a weakening U.S. economy.
Rates fell by 25 basis points over the last week, the biggest drop since July 2022.
The drop in rates provided a small boost to overall mortgage demand. The overall market composite index — a measure of mortgage application volume — rose in the latest week, the Mortgage Bankers Association (MBA) said on Wednesday.
The market index rose 2.5% to 165.9 for the week that ended November 3 relative to a week earlier. A year ago, the index stood at 199.9.
Key details: Home-buying and refinancing activity inched up as rates fell.
Buyer demand rose as some consumers jumped to seize lower rates. The purchase index — which measures mortgage applications for the purchase of a home — rose 3% from last week.
Refinancing activity also rose modestly. The refinance index increased by 1.6%.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.61% for the week that ended November 3. That’s down from 7.86% the week before, the MBA said.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.58%, down from 7.8% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration fell to 7.36% from 7.57%.
The 15-year fell to 6.98% from 7.14% relative to the previous week.
The rate for adjustable-rate mortgages fell to 6.76% from last week’s 6.77%. ARMs now comprise 9.8% of all applications.
The big picture: With indications of a weakening labor market and the U.S. Federal Reserve signaling a pause in interest-rate hikes, mortgage rates took a dive in the latest week, dropping by 25 basis points. If the economy continues to weaken, rates will drop further.
Meanwhile, aspiring homeowners who were spooked by 8% rates likely jumped on the dip, which boosted demand for mortgages. Further declines may prompt more home-buying activity, but that will still be constrained by the broader issue of low inventory.
What the MBA said: ”Last week’s decrease in rates was driven by the U.S. Treasury’s issuance update, the Fed striking a dovish tone in the November [Federal Open Market Committee] statement, and data indicating a slower job market,” Joel Kan, deputy chief economist and vice president at the MBA, said in a statement.
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was below 4.6% in early morning trading Wednesday.
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