/Mortgage rates fall to a two-month low, but weekly demand still drops – CNBC

Mortgage rates fall to a two-month low, but weekly demand still drops – CNBC

Robin Azougi 1st R, a licensed real estate salesperson with Douglas Elliman Real Estate, talks with prospective buyers at a house for sale in Floral Park, Nassau County, New York, on Sept. 6, 2020.

Wang Ying | Xinhua News Agency | Getty Images

Lower mortgage rates are not prompting homeowners or potential homebuyers to contact their lenders, as other obstacles stand in their way.

Total mortgage application volume fell 2.5% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The decline came even though the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17% from 3.20%, with points decreasing to 0.30 from 0.36 (including the origination fee) for loans with a 20% down payment. That is the lowest rate since the end of February.

Applications to refinance a home loan, which are highly sensitive to weekly rate moves, still fell 1% for the week and were 18% lower than one year ago. The rate on the 30-year fixed was 26 basis points higher a year ago, but rates were at record lows last fall, far lower than the current rate.

“Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Mortgage applications to purchase a home fell 5% for the week and were 34% higher than a year ago. The annual comparison, however, means little now because the housing market ground to a halt at this time last year, when the pandemic lockdown was in place. It then rebounded dramatically in the summer and is only now beginning to lose steam again.

Homebuyers are butting up against bidding wars in the competition for the record-low supply of homes for sale. That is causing home prices to skyrocket at the fastest pace in 15 years. Even today’s slightly lower interest rates are not enough to make up for the ever increasing cost of buying a home. Purchase applications have fallen for four of the last five weeks.

“While buyers were eager in early 2021, sellers have been holding back,” said Danielle Hale, chief economist for realtor.com. “We’ve seen 200,000 fewer new sellers than we would typically see in January and February and an additional 117,000 new sellers were missing compared to the typical year in March. These trends have resulted in extraordinarily frustrating trends for buyers, especially first-timers.”

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