Homeowners took the opportunity to refinance their home loans in the week ending March 8 as rates fell, contributing to a jump in mortgage applications, the Mortgage Bankers Association (MBA) said on Wednesday.
The Refinance Index jumped 12 percent for the week and shot up 5 percent compared to a year ago. Overall, applications for home loans rose by more than 7 percent as mortgage rates fell under 7 percent on the back of economic data showing a less robust jobs market.
“Mortgage rates dropped below 7 percent last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” Mike Fratantoni, MBA’s chief economist, said in a statement.
A slowing jobs market helped trigger expectations that it will lead to cooling inflation as it may lead to less spending by Americans, which in turn may slow down price increases.
Inflation has been hot in America coming out of the pandemic, a dynamic that prompted the Federal Reserve to aggressively hike rates to 2-decade highs, a move that increased borrowing costs, including for mortgages. Slowing inflation could mean a cutting of rates, which would lead to less costly home loans.
For the week ending March 8, the Bureau of Labor Statistics reported that employers added 275,000 new jobs in February, but also revised down figures from the previous two months by a combined 167,000. The unemployment rate ticked up to 3.9 percent.
This contributed to the decline in rates, which at their peak in the fall of 2023 soared to 8 percent. For the week ending March 8, the average 30-year fixed rate for mortgages of at least $766,550 declined to 6.84 percent from a little over 7 percent the week before.
Buyers who purchased homes during this time took the opportunity to save some cash on their monthly mortgage payments, according to the MBA, even as refinancing activity remains low from a year ago.
“Refinance volume picked up by 12 percent, with a larger, 24 percent increase in the government refinance index,” Fratantoni said. “While these percentage increases are large, the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years.”
Housing economists, however, are expecting rates to tick up in the coming days after inflation data this week came in higher than forecast. The Consumer Price Index (CPI) inflation came in at 3.2 percent for February on Tuesday, suggesting that policymakers may keep borrowing costs higher for longer to force price increases to slow down to the central bank’s target of 2 percent.
At the close of business on Tuesday, there was already evidence of an upward trend. The 30-year fixed rate mortgage ticked up to 6.94 percent, according to Mortgage News Daily, up 0.02 percent from the previous day’s rate.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.