Current Trends in Mortgage Rates

Mortgage interest rates have seen a slight decrease for the second consecutive week, attributed to unsettling economic reports. According to the Mortgage Bankers Association (MBA), the overall demand for mortgages surged by 11% during this time.

The average interest rate for 30-year fixed-rate mortgages dropped from 6.89% to 6.84% for loans amounting to $806,500 or less. However, points (including origination fees) have slightly increased from 0.67 to 0.68 for buyers making a 20% down payment. It’s worth noting that this rate remains 34 basis points higher compared to the same week a year earlier.

The Economic Context

Recent economic indicators—such as a decline in first-quarter GDP growth and indications of a contraction in the manufacturing sector—coupled with a favorable employment report for April, have contributed to the changes in mortgage rates. Michael Fratantoni, the MBA’s senior vice president and chief economist, stated:

“The economic news last week included a negative reading for first-quarter GDP growth and further signs of contraction in the manufacturing sector, mixed with a solid employment report for April. The net impact on mortgage rates was mostly downward but just back to levels from early April.”

Surge in Mortgage Applications

Interestingly, applications for purchasing homes increased by 11% week-over-week and were up 13% compared to the same time last year. This rise is largely driven by a notable demand for conventional loans, a trend that Fratantoni described as “a surprisingly strong move given lingering economic uncertainty.” He explained:

“Borrowers of conventional loans tend to have larger loan sizes and more apt to be move-up buyers.”

Despite a generally sluggish housing market in April, potential buyers seem hesitant to commit to significant financial decisions, fueled by concerns over tariffs and fluctuations in the stock market.

Refinancing Trends

The trend in refinancing applications also mirrors the increase, with an 11% rise over the past week and a significant 51% increase year-over-year. Notably, loans backed by the Veterans Affairs (VA) increased by 26% during this period, further driving the refinancing demand.

Market Outlook

As the new week begins, mortgage rates have remained relatively stable. However, this could change with the upcoming Federal Open Market Committee (FOMC) meeting scheduled for Wednesday. While no rate cuts are anticipated, any unexpected remarks from Fed Chair Jerome Powell could significantly influence market behavior and mortgage rates later this week.