Mortgage rates in the US fell last week amid reports of a weakening labor market. Homeowners took advantage of this opportunity, leading to an increase in demand for mortgage refinancing, UNN reports, citing MarketWatch.
Details
The 30-year fixed-rate mortgage in the US fell by 10 basis points to its lowest level since March, as economic data indicated weakness in the US economy, particularly in the labor market.
As of August 8, the average rate for a 30-year mortgage decreased to 6.67%. The drop energized homeowners who wanted to refinance their loans or purchase larger properties. The data is taken from the weekly report of the Mortgage Bankers Association (MBA), an industry trade group.
Overall mortgage demand in the US increased by approximately 11% for the week ending August 8. Refinancing activity surged by 23%, as the data showed, indicating high demand from current homeowners. Refinancing activity last saw such a strong increase in April. Homeowners looking to refinance were particularly sensitive to rate changes, especially those with larger loan balances, according to the MBA.
"Refinancing accounted for 46.5% of [mortgage] applications, and as seen in other recent refinancing surges, the average loan size significantly increased to $366,400," said Joel Kan, MBA's Deputy Chief Economist.
On the other hand, buyers were much less willing to enter the market. Purchase activity, which refers to home buyers applying for mortgages to acquire homes, increased by 1.4% compared to the previous week. Demand for home purchases was less sensitive to the rate.
Interest in adjustable-rate mortgages (ARMs), considered a riskier choice than the traditional 30-year fixed-rate mortgage, also sharply increased last week. According to the MBA, the number of applications for ARMs rose by 25% for the week, reaching its highest level since 2022. ARMs are considered risky because they offer lower mortgage rates for a certain period before they subsequently adjust to the prevailing market rate, leading to higher payments for the homeowner.
Mortgage rates were already showing signs of significant decline, according to industry reports that survey lenders daily, as previously reported by MarketWatch.
An economist at one broker warns people that the drop may be short-lived, as it is unclear how future economic data will affect the direction of rates.
"Last week's weak jobs report increases the likelihood of an interest rate cut [by the Federal Reserve] in September," Chen Zhao, head of economic research at Redfin, said in her blog.
"The market's expectation of this cut has already led to lower mortgage rates, and there's no guarantee they will fall further," she added. So "there's a chance that mortgage rates could fluctuate when more economic data is released in the coming weeks."
According to Redfin data, as of August 3, the median home sale price was $397,000, up approximately 2% from the same period last year. A home buyer with a 30-year mortgage rate of 6.72% would pay about $2,700 in monthly mortgage payments.
US housing prices hit new record despite signs of easing13.08.25, 10:19 • [views_5050]