Demand for refinancing increased substantially in the second week of July, with applications to refinance a mortgage increasing by 7% compared to the previous week. However, this is still substantially lower than it was at the same time last year, indicating that people are still reluctant to commit to refinancing. This is due in no small part to high interest rates, which make the prospect of refinancing a mortgage far less appealing for many.
Refinancing Applications Are Up, But Still Recovering
According to the Mortgage Bankers Association, applications for refinancing are up by about 7% in the second week of July, compared to the previous week. This is a substantial increase, generally indicating an increase in demand. However, this is still down 32% compared to the same time last year, indicating that the market is still significantly slower than it was the previous summer.
Overall Applications Up Slightly
At the same time, overall applications for mortgages are up by about 1%, which is still about 21% lower than it was the same time last year. When looking only at new applications for mortgages, demand was down by about 1% week over week. This also seems to indicate that many buyers are cool on the current real estate market.
The Effects of High Interest Rates
The primary drivers of both the drop in new mortgages and the decline in refinancing can be traced back to high mortgage interest rates. The interest rate 30-year fixed-rate mortgages with conforming loan balances decreased from 7.07% to 6.87% during the second week of July, which is a substantial decline but still more than a full percentage point higher than what it was at the same time last year. As a result, many people with existing mortgages are not in a good position to refinance, at least until interest rates drop more.
What This Means For the Market
This increase in refinancing is indicative of a slight increase in demand, but the market is still much cooler than it was last year. However, buyers may be reconsidering buying new homes or refinancing their current mortgages as more inventory comes onto the market and interest rates drop. This means that the market could be getting better much sooner.
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