Mortgage demand jumps as rates fall to lowest since 2024

Core Insights - U.S. mortgage rates have declined to their lowest level in nearly a year, with the average interest rate on a 30-year fixed mortgage falling to 6.49% as of the week ending September 5, 2024 [1] - The decrease in mortgage rates has led to a significant increase in loan applications, with refinancing applications up 12% from the previous week and 34% higher than the same week last year [2] - The housing market is showing signs of improvement, with price increases slowing and the number of homes for sale reaching its highest level in several years [3] Mortgage Application Trends - Refinancing accounted for almost half of all mortgage applications, indicating strong borrower demand [3] - There has been a rise in demand for adjustable-rate loans, which offer lower initial interest rates compared to fixed-rate mortgages [3] - The week marked the strongest borrower demand since 2022, with both purchase and refinance applications increasing [3] Economic Context - Despite lower mortgage rates, rising living costs may deter potential future homeowners from purchasing homes [4] - Upcoming inflation data is expected to show an uptick, which could widen the gap between current levels and the Federal Reserve's 2% target [4] - Mortgage rates are influenced by U.S. Treasury yields, which have dropped due to weak job market data, leading to expectations of potential rate cuts by the Federal Reserve [5]