Mortgage demand from homebuyers increases by 12% following the first drop in interest rates in two months.

• The number of mortgage applications for purchasing a home rose by 12% compared to the previous week and was 52% greater than the same week last year.
• The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 6.90% to 6.86%.
• The number of applications to refinance a home loan decreased by 3% this week, but was 119% greater than the same week last year.

Last week, mortgage rates decreased, causing homebuyers to enter the market, resulting in a 6.3% increase in total mortgage demand compared to the previous week, as per the Mortgage Bankers Association's seasonally adjusted index.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 6.90% to 6.86%, while the points remained unchanged at 0.70 (including the origination fee) for loans with a 20% down payment.

Despite the slight decline in rates, there was a considerable amount of pent-up demand among homebuyers. Some were holding off until after the election, others for lower rates, and others for more supply. Now, all of those factors have been addressed.

Mortgage applications for purchasing a home increased by 12% from the previous week and were 52% higher than the same week one year ago. Despite higher mortgage rates last year, they are currently falling. However, the supply of homes for sale was extremely limited last year, but has improved significantly this year.

Despite the recent increase in rates, buyers have remained in the market due to the growth in for-sale inventory and a strong economy. The increase in conventional purchase applications has contributed to the highest average purchase loan size of $439,200 in almost a month, according to Joel Kan, an MBA economist.

The number of applications to refinance a home loan decreased by 3% this week, but was 119% greater than the same week last year.

That annual comparisons, though, have a glitch.

"The decrease in refinance activity was due to decreases in FHA and VA refinances. Despite a significant increase in applications compared to the previous year, this increase was measured against the week of Thanksgiving 2023, which was a week earlier than this year's holiday," Kan stated.

This week, mortgage rates began slightly lower, but they may experience a larger change following the release of economic data on Wednesday. Bond markets tend to be volatile during holiday weeks.

Matthew Graham, chief operating officer at Mortgage News Daily, stated that there may be some random trading in either direction during Thanksgiving week due to the unique market conditions resulting from a heavily abbreviated trading week.