Mortgage rates hit lowest level in nearly 4 years

Mortgage rates fell sharply last week, which helped drive gains in refinancing while homebuyer demand appeared unaffected.

Total mortgage application volume remained essentially flat, up just 0.4% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The average contract interest rate for 30-year fixed-rate mortgages with loan balances of $832,750 or less decreased from 6.17% to 6.09%; Points including the origination fee for loans with 20% down payment decreased from 0.56 to 0.53. This was the lowest level since September 2022.

Applications to refinance a mortgage increased 4% last week from the previous week and were 150% higher than the same week a year ago, when rates were 79 basis points higher. There has been some trouble refinancing lately as rates have fallen. While comparisons to a year ago are pretty big, it’s important to take into account that refinancing was quite low at this time last year.

Mortgage applications to buy a home fell 5 percent this week, but increased 12 percent compared to the same period last year. While lower mortgage rates are improving affordability, home prices are still slightly higher than this time last year and economic uncertainty is weighing heavily on consumers.

Redfin addressed this uncertainty in a report in January that showed nearly 40,000 home sales contracts had been canceled nationwide; This equates to 13.7% of homes put under contract. That was up from 13.1% a year ago and was the highest share for January in records dating back to 2017.

Borrowers are also looking to save more on adjustable-rate mortgages (ARMs), which are slightly riskier but offer lower rates.

“The ARM share remained above 8 percent as ARM rates remained 80 basis points below affordable fixed rates,” MBA economist Joel Kan said in a statement. “This provides an incentive for payment-sensitive borrowers or those seeking larger loans to select this product offering.”