As a key borrowing rate fell to a four-month low at the start of 2023, the demand for US home loans increased once more, a trend that may signal an improvement in the housing market.
The Mortgage Bankers Association reported on Wednesday that seasonally adjusted mortgage application volume increased by 7% from the previous week. The results of the survey for the week ending January 20 have been modified to account for the Martin Luther King Jr. holiday.
Applications Surge
The Mortgage Bankers Association’s index tracking refinances applications was 15% higher than the previous week, while its seasonally-adjusted purchase index rose by 3%. The seasonally adjusted purchase index reached its highest level since August 2022’s beginning, while the volume of refinance applications reached its highest level since September.
In addition, the benchmark mortgage rate for homebuyers has declined for the third consecutive week. The average contract interest rate for 30-year, fixed-rate mortgages with loan balances of $726,200 or less fell to 6.2 percent. Last week, the rate was 6.23 percent.
The move decreased the 30-year fixed interest rate to its lowest point since September 2022.
“We anticipate the return of prospective buyers to the market if interest rates continue to fall and home prices continue to fall. Many have awaited the resolution of affordability concerns.” Joel Kan, the MBA’s assistant chief economist, commented on the survey results.
In 2022, affordability worsened as a result of the Federal Reserve’s rapid and substantial rate hikes intended to counteract inflationary pressures. The 30-year mortgage rate reached 7.16 percent in October, contributing to the least affordable surroundings for American homebuyers since 2001.
Last week, the MBA reported a 15% increase in refinancing activity. However, the majority of borrowers with locked-in lower rates have “very little incentive” to refinance. A year ago, the rate of refinancing was 77% faster than it is today.
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Improve Your Mortgage Rate
In order to obtain a lower interest rate, an increasing number of people are switching mortgage deals in the middle of the application process, according to experts.
As mortgage rates begin to decline after reaching record highs in September of last year following the mini-Budget, property values are beginning to decline after a long period of growth.
The average fixed rate for five years is currently 5.26 percent, while the average fixed rate for two years is 5.49 percent.
This is a decrease from 2.66 percent and 2.38 percent in January of the previous year. The majority of brokers will provide clients with a rate check service that allows them to compare their current rate to the market in the event that a lower one has become accessible.
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