Mortgage applications fall as homeowners hit pause on refinancing
With the Federal Reserve leaving interest rates on hold for now, Americans are feeling less pressure to refinance their home loans.
Mortgage applications eased last week even as rates fell, a sign that refinancing activity is cooling.
The volume of mortgage applications fell 2.2% on a seasonally adjusted basis for the week ended Nov. 15, according to the Mortgage Bankers Association. That was driven by an 8% slide in refinancing activity. The decline marks an about-face after refinance demand jumped 13% the prior week.
Refinance volume has been strong in recent months, as lower mortgage rates have given homebuyers a reprieve. Mortgage rates slid below 4% last week amid a drop in Treasury yields. The average interest rate for 30-year fixed-rate mortgages, with conforming loan balances of $484,350 or less, fell to 3.99% from 4.03%.
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Still, refinancing demand cooled. One possible reason: Some analysts said that borrowers were likely less worried that rates have bottomed. Mortgage rates remain lower than a year ago. The Federal Reserve has also signaled that it would take a measured approach to lowering borrowing costs, which could help keep mortgage rates around current levels in the near term.
“Rates have stayed in the same narrow range of around 4% since July, so we may be starting to see the expected slowdown in refinancing as the pool of eligible homeowners shrinks,” Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association, said in the report.
Another issue facing homebuyers: housing affordability. Just 21% of Americans in October said now is a good time to buy a home, down from 28% in September, according to a sentiment survey by Fannie Mae this month.
“The ‘good time to buy’ component has declined notably, despite low mortgage rates, due in part to the persistent challenge of a lack of affordable housing supply,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said in the report.
Even so, purchasing activity remained strong last week, rising 7% from a year ago, MBA said. That comes as the housing sector has rebounded recently following a weak start to the year.
Fresh housing data released this week signaled the housing market is continuing to strengthen. U.S. homebuilding rebounded in October and permits for future home construction jumped to a more than 12-year high.
This article originally appeared on USA TODAY: Homes for sale: Mortgage applications drop as refinancing activity cools
