‘Tis finally the season — to refinance

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Published Date 12/18/2023

It’s about time. MarketWatch’s Aarthi Swaminathan reports that the demand for mortgages rose this week as mortgage rates fell to the lowest level since July, rates dropped 10 basis points in the last week, and the 30-year rate is 54 basis points lower than a month ago.

Those who bought their homes at higher rates are feeling the love, as these lower rates provided a boost to buying and refinancing demand. The overall market composite index—a measure of mortgage application volume—rose in the latest week, according to the Mortgage Bankers Association (MBA).

Interesting how all this works, though, as home-buying and refinancing activity increased on the back of lower rates. “The purchase index—which measures mortgage applications for the purchase of a home—rose 3.5% from last week,” says Swaminathan. But refinancing activity surged, with the refinance index increasing by 19.4%, with a “particularly notable increase for FHA and VA refinance applications,” he said, citing the MBA.

In the big scheme of things, homeowners, (not necessarily home buyers), are jumping at the dip in rates to refinance their mortgages. Most economists, however, expect rates to continue to fall by the end of next year, which could stimulate home-buying as well.

While the majority of homeowners sitting on rates far below that, having refinanced or purchased when rates were at rock bottom lows, it may take a while for sales activity to pick up as inventory may remain low.

“Mortgage rates dropped last week, as incoming data point to a slowing economy and support a pivot by the Federal Reserve to begin cutting rates next year,” said Mike Fratantoni, chief economist and senior vice president at the MBA, said in a statement.

MarketWatch, TBWS

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