A third consecutive drop in mortgage rates has led to a surge in refinancing activity, pushing total mortgage demand higher, according to the latest weekly survey from the Mortgage Bankers Association (MBA).
By the numbers:
- The total mortgage demand index rose to 201.9 for the week ending May 17, up 1.9% from the previous week. This marks the highest level in five weeks.
- Refinance demand jumped 7%, reaching a 20-month high. This surge increased the refinance share of mortgage activity to 34.0% of total applications.
- In contrast, the Purchase Index fell by 1.0%, hitting its lowest level in the past six weeks.
Rates Falling: The average contract interest rate for 30-year fixed-rate mortgages dropped to 7.01%, down 7 basis points from the prior week and the lowest level in seven weeks.
What They’re Saying: Joel Kan, MBA’s Deputy Chief Economist, broke down the current market “Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications. Purchase activity continues to lag despite this recent decline in rates, down 11 percent from a year ago, as potential buyers still face limited for-sale inventory and high list prices.”
Tale of Two Markets: While the decline in mortgage rates has incentivized refinancing, the purchase market remains sluggish. High home prices and limited inventory continue to deter potential buyers, highlighting the ongoing challenges in the housing market.