Mortgage demand from homebuyers drops even as interest rates pull back

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Applications to refinance a home loan, which are most sensitive to weekly rate changes, increased 5% for the week and were 7% higher than the same week one year ago.

“Treasury yields continued to move lower last week and mortgage rates declined for the second week in a row,” said Joel Kan, MBA’s vice president and deputy chief economist. “The decline in rates led to a small boost to refinance applications, including another strong week for VA refinances. However, the overall level of refinance activity remains low.”

Applications for a mortgage to purchase a home fell 2% for the week and were 14% lower than the year-earlier period. The drop was driven by a 9% decline in FHA applications. Those loans are favored by first-time or lower income buyers because they allow much smaller down payments than conventional loans.

“While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight,” Kan added.

Mortgage rates moved slightly lower to start this week, but all eyes are now on the monthly consumer price index report, set to be released Wednesday. Another read on inflation will influence the next move from the Federal Reserve on interest rates.

“Forecasts are already clear in their expectations for a 0.3% increase in core prices, month over month,” wrote Matthew Graham, chief operating office of Mortgage News Daily. “The difference between a result of 0.2 or 0.4 is surprisingly massive when it comes to the world of interest rates. A 0.1 or 0.5 result could easily result in the largest rate jump/drop in months.”



This article was originally published by a www.cnbc.com

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