U.S. mortgage rates took their biggest one-week drop in more than a year last week.
The Mortgage Bankers Association reported the contract rate on a 30-year fixed mortgage fell 25 basis points to 7.61%. That’s the lowest level since the end of September.
Market watchers point to the Federal Reserve’s decision last week to hold interest rates steady as one reason for the slide in mortgage rates, adding to hopes the housing sector will improve in the coming months.
The MBA also reported mortgage applications for home sales rose 3%. Mortgage brokers say it’s no surprise that with a tight market and plenty of frustrated would-be buyers, there was a surge in demand.
Refinancing activity ticked up as the refinance index increased by 1.6%.
There is a way to go before industry professionals see the benefits of rate changes.
The MBA Index, a survey of mortgage bankers, commercial banks, and other institutions involved in the retail residential mortgage business, rose to 165.9, a 2.5% jump from a week earlier. The index is still down from 199.9 a year ago, however.
As Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted: “The purchase index is still more than 20% behind last year’s pace, as many homebuyers remain on the sidelines until more for-sale inventory becomes available.”
Still, the rate dive is viewed as good news by many in the industry.
Jessica Lautz, Deputy Chief Economist and Vice President of Research at the National Association of Realtors, says the Fed’s decision and the falling rates could be a sign of things to come.
“While both are higher than in recent years and impact the housing market, this could be a turning point for the relief potential buyers and sellers desperately need,” Lautz said.
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