The numbers: Demand for mortgages rose this week as mortgage rates fell to the lowest level since July.
Rates dropped 10 basis points in the last week, and the 30-year rate is 54 basis points lower than a month ago.
Lower rates provided a boost to buying and refinancing demand. The overall market composite index — a measure of mortgage application volume — rose in the latest week, according to the Mortgage Bankers Association (MBA) said on Wednesday.
The market index rose 7.4% to 194.5 for the week ending December 8 from a week earlier. A year ago, the index stood at 210.7.
Key details: Home-buying and refinancing activity increased on the back of lower rates.
The purchase index — which measures mortgage applications for the purchase of a home — rose 3.5% from last week.
Refinancing activity surged, on the other hand. The refinance index increased by 19.4%, with a “particularly notable increase for FHA and VA refinance applications,” the MBA said.
The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 7.07% for the week ending December 8. That’s down from 7.17% from the week before.
The rate for jumbo loans, or the 30-year mortgage for homes sold for over $726,200, was 7.22%, down from 7.35% the previous week.
The average rate for a 30-year mortgage backed by the Federal Housing Administration was down to 6.84% from 6.98%.
The 15-year fell to 6.67% from 6.8% from the previous week.
The rate for adjustable-rate mortgages fell to 6.47% from last week’s 6.58%.
The big picture: Homeowners, more so than home buyers, are jumping at the dip in rates to refinance their mortgages.
But most economists expect rates to continue to fall to the 6% range by the end of next year, which could stimulate home-buying.
With majority of homeowners sitting on rates far below that, it may take a while for sales activity to pick up as inventory may remain low.
What the MBA said: “Mortgage rates dropped last week, as incoming data point to a slowing economy and support a pivot by the Federal Reserve to begin cutting rates next year,” said Mike Fratantoni, chief economist and senior vice president at the MBA, said in a statement.
“Borrowers who had seen rates near 8 percent earlier this fall are now seeing some lenders quote rates below 7 percent,” he added.
Market reaction: The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was below 4.2% in early morning trading Wednesday.