More Americans are applying for a mortgage as interest rates drop to the lowest point since September 2022

After rising for most of 2022, US mortgage rates took a nosedive at the beginning of this year. American homebuyers have returned from the holidays to the lowest interest rates in the past four months and decided to take advantage of this opportunity. As a result, applications for a home loan and refinancing surged in the second week of January.

Mortgage application volume jumped 27.9 percent from one week earlier, according to the latest data from the Mortgage Bankers Association’s (MBA) survey. As interest rates decrease, more people feel comfortable applying for a home loan. In addition, those, who already have a mortgage, get a chance to refinance it and lower their monthly payment. 

US mortgage rates set a pandemic-era record in October 2022 after reaching 7.16 percent. Since then, interest rates have gone down nearly a full percentage point, causing a surge in application volume. The average contract interest rate for a 30-year conforming home loan ($726,200 or less) fell to 6.23 percent. The mortgage rate for a jumbo loan (greater than $726,200) averaged 6.08 percent in the week ending January 13, 2023.

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” said Mike Fratantoni, MBA’s SVP and Chief Economist. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

Refinance demand went up 34 percent between January 6 and January 13, 2023, but remained more than 80 percent below last year’s levels, when mortgage rates averaged 3.5 percent. The refinance share of mortgage activity rose to 31.2 percent of total applications, up from 30.7 percent the week before. 

Resources:

“Mortgage Applications Increase in Latest MBA Weekly Survey,”by Falen Taylor (Mortgage Bankers Association, 2023)

“Mortgage applications surge 25% in the new year as interest rates drop,” by Holden Walter-Warner (The Real Deal, 2023)

“Mortgage demand jumps nearly 28% in one week, as interest rates drop to lowest point in months,” by Diana Olick (CNBC, 2023)