The Chicago Journal

Mortgage applications advance as interest rates decline

As homeowners and prospective buyers look for cheaper mortgage rates, the number of mortgage applications has been steadily declining for several months.


The Mortgage Bankers Association’s seasonally adjusted index shows that applications rose 3.2% over the prior week.

The 30-year fixed-rate conforming mortgage average contract interest rate increased by 0.1 percentage point last week, reaching 6.42%.

The points for loans requiring a 20% down payment consequently increased from 0.63 to 0.64.

Since last month, rates have been declining as a result of official claims that inflation is falling.

Tuesday interest rates

Interest rates dropped as a result of the announcement of the November consumer price index on Tuesday.

According to Mortgage News Daily, the average rate for a 30-year fixed mortgage has dropped to 6.28%.

The rate is currently at its lowest since the middle of September.

The fall has been timed to coincide with a lower-than-expected report on the consumer price index for November.

Investors flocked to US Treasury bonds once the study was published, which reduced yields.

Bond market

“The second consecutive month of reassuring CPI data continues to build a case that inflation has turned a corner,” said Mortgage News Daily CEO Matthew Graham on Tuesday.

“But rates will be careful about reading too much into that potential shift given the volatility of the data in recent months.”

“The bond market will also want to see what the Fed does with this info in tomorrow’s updated Fed rate forecasts in the dot plot.

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Rate movement

Beginning in January 2022, mortgage rates increased quickly throughout the spring and summer.

By the end of October, the 30-year-fixed rate had jumped from 3% to almost 7%.

According to the National Association of Realtors, existing home sales have fallen for nine consecutive months and decreased by 24% in October compared to the same month last year.

However, rates significantly decreased in November due to a weaker inflation signal from the October CPI.

In the end, the rate for November came to 6.63%.

Cautiously, some people said the lower costs would make people want to revisit the market.

The temporary August rate drop was announced by Doug Yearley, CEO of luxury homebuilder Toll Brothers, during the call with investors to discuss the company’s quarterly results.

“There are some very very modest green shoots over the last few weeks, as rates have come down,” said Yearley.

“But I am not ready to get sucked back into the conversation we had in August when we felt better.”


Redfin, a real estate website, reports that in November, homebuyers’ desires started to rise.

The firm’s demand index grew 1.5% from the previous month.

However, it was also down 20% from the same time last year over the four weeks that ended on November 27.

“There have been a handful of pieces of relatively good news for the housing market lately, but we’re far from out of the woods,” said Taylor Marr, the deputy chief economist for Redfin.

“Key indicators of homebuying demand will likely be teetering on a knife’s edge with every data release that comes out related to the Fed’s path to eventually bringing rates down.”

Rate locks

Consumers did not lock in higher mortgage rates due to optimism, a standard indicator of future home sales.

Black Knight, a provider of mortgage technology and data, observes a 22% decline in rate locking from October to November.

Additionally, this year saw a 48% decrease in rate locking compared to last year.

“It’s still extremely unaffordable even with rates coming down, even with prices coming down in each of the last four months,” said Andrew Walden, the vice president at Black Knight.

“We’re still less affordable than when we were at the peak of the market in 2006, and you’re seeing that play out in the rate lock numbers.”

Walden highlights that inventory is still 40% below ideal levels despite homebuilders’ ongoing exodus and the scarcity of eager sellers.

Even if prices and rates have decreased, they are still significantly higher than they need to be when compared to wages that, historically speaking, make housing accessible.

“As we move throughout 2023, you’re going to see prices continue to soften. You’re going to see incomes hopefully continue to grow and eat up some of that gap,” said Walden.

“I think, likely, we are going to see rates come down from where they are today, but it’s going to take an extended period of time to get there.”

Mortgage applications

Last week, 3% more mortgage applications for refinancing home loans were submitted.

They were still 85% lower than they had been the previous week despite this.

The rate decline from a high of nearly 7% in October broadened the tiny group of prospective borrowers who might benefit from a refinance.

The overall number of applications to buy a house for the week was 4% more than the week prior and 38% lower than in 2021.

The annual comparison is currently decreasing as rates fall.

MBA economist Joel Kan said the following in a press release:

“The ongoing moderation in home-price growth, along with further declines in mortgage rates, may encourage more buyers to return to the market in the coming months.”

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Rates and demand

Mortgages with adjustable rates are now available due to the decline in demand brought on by lower interest rates.

Applications for ARMs dropped from 13% in October to 7.7% last week.

ARMs involve greater risk despite having lower rates because, after their fixed maturities, they return to the prevailing market rate.

Mortgage rates decreased after the release of the CPI statistics on Tuesday, but they can increase again after the Federal Reserve publishes its most recent interest rate change on Wednesday.

“A friendly enough Fed could easily break the range, but we have our doubts as to how much fuel the Fed will want to add to the fire,” said Mortgage News Daily chief operating officer Matthew Graham.

“If anything, the Fed is more likely to try to temper the exuberance because the exuberance is counterproductive to the Fed’s goals.”


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