Potential homebuyers and a slim number of current homeowners are trying to take advantage of easing borrowing costs.
Mortgage applications rose over the past week 7.2% on seasonally adjusted basis, according to data, released Wednesday, from the Mortgage Bankers Association’s Market Composite Index, a measure of mortgage loan application volume.
Although there was an increase in applications over the past week, it remained well below levels from a year ago when borrowing rates were more than a percentage point lower than today, according to the MBA’s index.
Still, the uptick in applications comes as the average long-term U.S. mortgage rate continues to ease for the second consecutive week.
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Last week, the average rate on the benchmark 30-year home loan fell to 6.71% from 6.79%, according to Mortgage buyer Freddie Mac. The pullback follows three straight weekly increases, which pushed up the average rate to its highest level since early November, when it climbed to 7.08%.
A year ago, though, the 30-year fixed mortgage rate averaged 5.23%.
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Due to the continued elevated rates, applications to refinance a loan rose by a slim margin, 6%, over the past week, which was less than a third of all applications. It was 41% lower than the same period a year ago, according to the data.
“Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates,” Joel Kan, MBA’s vice president and deputy chief economist, said.
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In fact, according to a recent Redfin report, more than 91% of U.S. homeowners with mortgages have an interest rate below 6%, giving them all the more reason to stay put.
Unfortunately, this is contributing to the shortage of new listings on the market.
“Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory, continue to constrain home buying activity in many markets,” Kan said.
The Associated Press contributed to this report.