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Mortgage rates fall for third straight week, but demand falls further


A For Sale sign appears in front of a home on Oak Street in Patchogue, New York, on May 17, 2022.

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Mortgage rates were up more than 7% just a month ago, but since then, they’ve fallen more than half a percentage point. However, mortgage application volume fell 0.8 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

The results also include an adjustment for Thanksgiving observance.

The average contract rate on 30-year fixed-rate mortgages with matching loan balances ($647,200 or less) dropped to 6.49% from 6.67%, with a score remaining of 0 .68 (including the initial fee) for loans with a 20% down payment.

Continued weakness is refinancing demand, which fell 13% from the previous week and 86% lower from the same week a year ago. Oddly enough, about 100,000 existing borrowers could benefit from refinancing with the latest rate cut, according to Black Knight.

Mortgage applications increased 4% from the previous week but demand was 41% lower than the same week a year ago. Existing home sales continue to decline, while new home sales are benefiting from builder concessions, specifically deals in which builders lower mortgage rates.

“Economics at home and abroad are weakening, which should lead to slower inflation and allow the Fed to slow the pace of rate hikes. Purchasing activity picked up slightly after adjusting for the Thanksgiving holiday, but interest rate cuts are still not enough to deliver refinancing operating profit,” noted Joel Kan, an MBA economist.

The percentage of adjustable-rate mortgages in subscription activity rose slightly to 9%, down from about 12% a month ago, when interest rates were higher. However, ARM’s market share was around 3% earlier this year, when 30-year fixed rates hovered near record lows. ARM offers lower interest rate but higher risk.

Mortgage rates were flat earlier this week, but by the end of the week that could change, as the much-anticipated monthly jobs report is due out. Any unforeseen swings in either direction will have a direct effect on mortgage rates.

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