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Falling mortgage rates are cause for optimism but haven’t done much yet to get would-be homebuyers off the fence, the Mortgage Bankers Association said Wednesday in releasing the results of a weekly lender survey.

The MBA’s Weekly Mortgage Applications Survey showed requests for purchase loans were down by a seasonally adjusted 5 percent last week compared to two weeks before, and 12 percent from a year ago.

Joel Kan

“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” MBA Deputy Chief Economist Joel Kan said, in a statement. “The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response.”

While requests to refinance were up 15 percent from a year ago, applications “were still at very low levels” when compared to historical demand, Kan said.

Homebuyer demand continues to be hampered by a limited supply of homes for sale, “but the recent strength in new residential construction will continue to help ease inventory shortages in the months to come,” Kan predicted.

Big drop in mortgage rates

At 6.65 percent Tuesday, rates on 30-year fixed-rate mortgages were up five basis points from a week ago but down 1.18 percentage points from a 2023 high of 7.83 percent registered Oct. 25, according to loan lock data collected by Optimal Blue.

For the week ending Dec. 29, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 6.76 percent, up from 6.71 percent the week before. With points increasing to 0.61 from 0.55 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 6.86 percent, essentially unchanged from 6.85 percent the week before. With points increasing to 0.41 from 0.34 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • For 30-year fixed-rate FHA mortgages, rates averaged 6.51 percent, essentially unchanged from 6.50 percent the week before. But with points increasing to 0.86 from 0.73 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • Rates for 15-year fixed-rate mortgages averaged 6.26 percent, down from 6.41 percent the week before. Although points increased to 0.73 from 0.50 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.

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