Potential Homebuyers Jump Into Mortgages As Interest Rates Continue To Fall

Mortgage applications went up 3% right before Thanksgiving 2023.

If you’re looking to purchase a home, now is the time. The amount of mortgage applications are coming in hot as interest rates continue to get lower, CNBC reports.

According to the Mortgage Bankers Association, applications went up 3% right before Thanksgiving 2023. Contract interest rates for typical 30-year fixed-rate mortgages went down to 7.61% to 7.41% – with points decreasing from 0.62 from 0.67 for loans requiring a 20% down payment. While the applications have been coming in strong, MBA’s deputy chief economist, Joel Kan, says they still are steady at very low levels.

“U.S. bond yields continued to move lower as incoming data signaled a softer economy and more signs of cooling inflation,” Kan said. “Mortgage applications increased to their highest level in six weeks, but remain at very low levels.”

Week after week, applications went up 4% but were still 20% lower than in 2022. Refinance applications went up just 2% during the Thanksgiving week and were close to 4% lower in the same week in 2022. Today, rates are going close to 75 basis points higher than last year but more than twice what they were in 2021 when refinancing was at a high. Most homeowners with mortgages have rates far lower than they would get now.

“The average loan size on a purchase application was $403,600, the lowest since January 2023,” Kan continued. “This is consistent with other sources of home sales data showing a gradually increasing first-time homebuyer share.”

Mortgage demands may be historically low, but the housing market is still struggling. A report from the National Association of Realtors shows sales for existing homes in October 2023 dropped to the lowest level in 13 years. To fight high financing costs, potential homebuyers have turned to larger down payments – with down payments rising to 14.7% in the third quarter.

Danielle Hale, chief economist for Realtor.com says, “the cost of borrowing remains high,” according to CNN. “If rates can hold onto this improvement, or notch a further decline, however, this could mean that ‘buying a home’ does seem like a viable new year’s resolution to a greater number of households,” she said.