Mortgage interest rates are at their lowest level in about four years

Although mortgage rates fell significantly last week, which helped prolong the rise in refinancing, homebuyer demand appears unimpressed.

The Mortgage Bankers Association’s seasonally adjusted index showed that total mortgage applications were essentially flat, increasing just 0.4% from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less, including origination fees for loans with a 20% down payment, decreased by 0.56 points to 0.53 points and from 6.17% to 6.09%. This is the lowest level since September 2022.

Mortgage refinance applications rose 4% last week from the previous week and 150% from the same week a year ago, when interest rates were 79 basis points higher. Refinancing has become a little more difficult these days as interest rates have fallen. While the comparison to a year ago is significant, it’s important to consider that refinances were much lower at this time last year.

The number of applications for mortgages to buy homes fell by 5% in the week, but rose by 12% from a year earlier. Although lower mortgage rates are improving affordability, home prices are still slightly higher than they were at this time last year, and economic uncertainty is weighing on consumers.

Redfin cited this uncertainty in a report showing that approximately 40,000 home sales contracts were canceled nationwide in January, representing 13.7% of homes under contract. This is up from 13.1% a year ago and was the highest January share on record dating back to 2017.

Borrowers also sought greater savings on adjustable-rate mortgages, which carry slightly more risk but lower interest rates.

“The ARM share remained above 8% as ARM rates remain more than 80 basis points below the compliant fixed rate,” MBA Economist Joel Kang said in a release. “This incentivizes payment-sensitive borrowers and those seeking larger loans to choose this product.”