February 25, 2024
Mortgage

Homeowners Are Refinancing Mortgages as Rates Stabilize


Refinancing activity rebounded for the week ending February 2 after declining the previous week, as mortgage rates stabilize in the under-7 percent level, contributing to a rise in home loans application, the Mortgage Bankers Association (MBA) said on Wednesday.

The Refinance Index jumped 12 percent from the week before February and also rose by a percent compared to one year ago, according to MBA. Meanwhile, mortgage applications jumped by nearly 4 percent in the same time span.

The average cost of a 30-year fixed rate mortgage for a loan of $766,550 ticked up slightly to 6.80 percent compared to 6.78 the previous week.

“Mortgage rates have stayed close to where they started the year, despite swings in Treasury yields because of slowing inflation offset by stronger than expected readings on the job market,” Joel Kan, MBA’s deputy chief economist, said in a statement shared with Newsweek. “Rates at these levels have not prompted much of a reaction in the refinance market, as most homeowners have mortgages with much lower rates.”

housing market
A property for sale in Monterey Park, California, on April 29, 2020. As mortgage rates stabilize, homeowners are looking to refinance their homes, lenders say.

FREDERIC J. BROWN/AFP via Getty Images

Mortgage rates peaked at about 8 percent in the fall of 2023, making the cost of a home loan the highest it had been since the turn of the century. The elevated rate environment discouraged both buyers and sellers to step into the housing market who were reluctant to incur higher monthly payments of their housing loan.

Part of the reason rates jumped so high was due to the Federal Reserve’s hiking of its funds rate to battle soaring inflation. The rise in prices is cooling giving confidence that policymakers will slash rates but a strong jobs market is creating uncertainty on how quickly those cuts will happen.

But to begin the year, there is evidence that buyers are showing interest in dipping into the housing market, according to real estate platform Redfin, as rates have fallen over the last few weeks.

Redfin’s Homebuyer Demand Index, which tracks requests for tours, went up 6 percent for the week ending January 28, the platform said. Real estate agents say, however, that that increase in interest has yet to translate to a substantial jump in sales.

MBA experts are seeing a similar bubbling up of buyer interest.

“Purchase activity has been strong to start 2024 compared to the final quarter of 2023. However, activity is still weaker than a year ago because of low housing supply,” MBA’s Kan said.

Supply of homes is a huge challenge for the housing market. Housing economists have told Newsweek in the past that the market is 4 million homes short of demand, contributing to a jump in prices.

Some economists suggest that as mortgage rates fall, the used homes market may pick-up as sellers would begin to come out of the sidelines and finally put their homes in the market.

“Once they start moving, and I suspect we’ll see more and more of those folks moving in the coming year, they’ll have to become somewhat aggressive on pricing, they’re going to have to lower their price,” Mark Zandi, chief economist at Moody’s Analytics, told Newsweek last week.