The surge in mortgage demand from homebuyers over the past two months appears to be waning, even as mortgage rates continue to drop.
Mortgage applications to purchase a home fell for the second straight week, down 1% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Purchase volume was still 15% higher than one year ago, but that annual comparison is now shrinking.
“The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options,” said Joel Kan, an MBA economist. “The average purchase application loan size increased to a record high in our survey — more proof that tight inventory conditions are leading to faster price growth.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.29% from 3.30% last week. Points including the origination fee increased to 0.36 from 0.32 for loans with a 20% down payment. That is another record low.
“Investors are contemplating the risks of the recent resurgence of Covid-19 cases to the labor market and economy, and Treasury rates, and mortgage rates are moving lower as a result,” said Kan.
Refinance demand, which is most sensitive to interest rates, fell 2% for t