The second week of January saw a substantial increase in mortgage demand, with the total number of applications for mortgages increasing by approximately 10%. This rise in mortgage demand affected both refinancing and new mortgages, which both went up during that same time period. This is largely attributed to declining interest rates, helping to bring the price of mortgages into more affordable levels for potential buyers.
Mortgage Demand Up 10%
Overall, mortgage demand was up by about 10.4% during the second week of January, a major surge in demand for mortgages. This increase in demand occurred at the same time that Treasury yields moved lower, seemingly in response to incoming inflation data. However, mortgage rates are still about 20% lower than they were at the same time last year.
Both New Mortgages and Refinancing Affected
Applications for both new mortgages and people seeking to refinance existing mortgages increased during this period. The number of people seeking new mortgages to purchase a home went up by about 9%, while people hoping to refinance their existing mortgage went up by 11% over the same time period. This was seemingly spurred by a continuing trend of declining interest rates, making mortgages more affordable than they were at their peak late last year.
Lower Interest Rates Spur Demand
The interest rate for a 30-year fixed interest mortgage with conforming loan balances fell from 6.81% to 6.75%, showing six straight weeks of declining interest rates. This is due to the Federal Reserve backing off its previously aggressive anti-inflation policy, which had previously brought interest rates up to the highest they had been since the year 2000. This has incentivized people who previously might have balked due to high interest rates to pursue new and refinanced mortgages.
How This May Impact the Market
This may be a sign of improvement for the market, which suffered significantly throughout 2023 thanks to high interest rates and low inventory. With more people looking to get into the housing market, it seems likely that this pattern may be shifting to an extent. However, this is dependent on the Fed continuing to avoid increasing interest rates again, which could happen if inflation starts to creep up once more.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
