Mortgage refinance demand surges as interest rates reach a 7-week low

• The interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less decreased from 7.08% to 7.01%.
• The number of applications to refinance a home loan increased by 7% during the week and was 21% greater compared to the same week in the previous year.
• The number of mortgage applications for purchasing a home decreased by 1% during the week and was 11% lower compared to the same week last year.

Last week, mortgage interest rates decreased for the third consecutive week, leading to higher refinance demand. Despite this, homebuyers remained unimpressed.

The Mortgage Bankers Association's seasonally adjusted index showed a 1.9% increase in total mortgage application volume compared to the previous week.

The interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less decreased to 7.01% from 7.08%, with points decreasing to 0.60 from 0.63, including the origination fee, for loans with a 20% down payment.

Despite a 7% increase in applications to refinance a home loan and a 21% increase from the same week a year ago, the gap between rates last week and those a year ago has been shrinking. However, the vast majority of borrowers still have rates significantly lower than what is offered today, so demand remains at a very low level.

"According to Joel Kan, MBA's vice president and deputy chief economist, the decline in interest rates from recent highs prompted some borrowers to take action, resulting in an increase in both conventional and government refinance applications. Despite this, VA refinances experienced a double-digit increase for the third consecutive week, although the current level of refinancing is still below its historical average."

Mortgage applications for purchasing a home decreased by 1% during the week and were 11% lower than the corresponding week a year ago. Despite the increase in mortgage rates, buyers are still facing a low supply and intense competition, which leads to bidding wars.

This week, there has been little change in mortgage rates, and the release of the Federal Reserve minutes on Wednesday is not expected to cause a significant reaction.

""The minutes of the Fed meeting are unlikely to cause any drama in this transparent and frequently spoken environment, as they have historically caused quick rate changes," wrote Matthew Graham, Mortgage News Daily's chief operating officer."