A significant drop in mortgage interest rates led to a surge in loan demand, with both current homeowners and potential homebuyers re-entering the market. Mortgage applications increased by 20.4% compared to the previous week, marking the first rise in three weeks. The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.73%, the lowest level since December 2024. Applications to refinance a home loan soared by 37% for the week and were 83% higher than the same week last year. Meanwhile, applications for a mortgage to purchase a home rose by 9% but were only 2% higher than a year ago.
Despite the positive increase in purchase volume, the numbers are still historically low due to high home prices, limited inventory, and economic uncertainty. The new tariffs imposed on countries like China, Canada, and Mexico are expected to further raise home prices, especially for new construction. Mortgage rates experienced a slight decrease at the beginning of the week, following the uncertainty surrounding the tariffs. However, bond yields and mortgage rates rebounded later in the week, leaning towards slightly higher rates.
Overall, the resurgence in loan demand was driven by the decrease in mortgage rates, prompting more buyers to enter the market. The continued increase in purchase applications provides hope for the upcoming spring homebuying season. However, challenges such as high home prices, limited inventory, and economic uncertainty continue to pose obstacles for potential buyers.
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