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The numbers: Mortgage rates dropped to the lowest level in two months, prompting buyers to return to the housing market.
Demand for mortgages rose 5.3% in the latest week as rates dropped for the fifth consecutive week.
Demand rose for both purchases and refinancing. That pushed the market composite index — a measure of mortgage application volume — up, the Mortgage Bankers Association (MBA) said Wednesday.
The market index rose 5.3% to 229.5 for the week ending April 7 from a week earlier. A year ago, the index stood at 393.5.
Key details: Few homeowners are refinancing. The refinance index rose 0.1%, but was down 57% compared to a year ago.
But home-buyers are active. The purchase index — which measures mortgage applications for the purchase of a home — rose by 7.8% from the previous week.
Rates fell across the board. The average contract rate for the 30-year mortgage for homes sold for $726,200 or less was 6.3% for the week ending April 7. That’s down from 6.4% the week before, the MBA said.
For homes sold for over $726,200, the average rate for the 30-year was 6.26%, down from 6.36% the previous week.
The 15-year fell to 5.78%, from 5.97% previously.
The rate for adjustable-rate mortgages fell to 5.51% from the previous week’s 5.61%.
The big picture: There’s a lot of pent-up demand in the housing market, but prospective buyers are watching the gyrations in mortgage rates and face challenges with low housing inventory.
Rates are falling across the board due to weaker economic data, giving would-be home buyers some breathing room to apply for mortgages.
Yet it’s unclear if the recovery will be sustained, as an uncertain economic outlook can also spook buyers who may be concerned about job security.
What the MBA said: “Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed-rate decreasing to 6.30%,” Mike Fratantoni, senior vice president and chief economist at the MBA, said.
“Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week, with purchase applications increasing by 8%,” he added.
Market reaction: The yield on the 10-year Treasury note
TMUBMUSD10Y,
was above 3.4% in early morning trading Wednesday.
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