Mortgage rates have continued their downward trajectory, reaching the lowest level in two months. Despite this drop, the demand for mortgages remains unresponsive. While applications for a mortgage to purchase a home remained flat for the week, they were up by 3% compared to the same period last year. Total mortgage application volume, however, saw a 1.2% decline from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.88% from 6.93%, marking a significant shift over the past few days. This decline comes as Treasury yields moved lower due to softer consumer spending data. Over the last four business days, the average top-tier mortgage rate fell by 0.22%, continuing its trend of moving within a narrow range over the past month.
"Long story short, bonds are in fashion at the moment,"
- Matthew Graham, chief operating officer at Mortgage News Daily.
Last year, mortgage rates were 16 basis points higher during this same period, highlighting a noticeable drop in rates over the past year. Despite this, the decline in rates has not spurred a corresponding increase in demand. Applications to refinance a home loan fell 4% for the week, though they were still 45% higher than one year ago.
"The broadest and most common explanations have to do with expectations for a downshift in global economic growth in response to domestic tariffs and cost-cutting efforts."
- Matthew Graham, chief operating officer at Mortgage News Daily.
In a notable exception, applications for FHA refinance saw an 8% increase over the week, according to Joel Kan, MBA's vice president and deputy chief economist.
"Although overall refinance application activity remained fairly weak, FHA refinance applications saw an 8 percent increase over the week,"
- Joel Kan, MBA's vice president and deputy chief economist.
The drop in interest rates can be attributed partly to consumers feeling less optimistic about the economy and job market. Despite these favorable conditions for borrowers, the expected surge in mortgage applications has not materialized.