Amidst growing economic uncertainty, demand for mortgages to purchase homes has declined further, despite relatively stable interest rates. This pullback suggests a cautious approach from potential homebuyers navigating an evolving economic landscape.

Purchase Applications See Further Decline

According to the Mortgage Bankers Association (MBA), applications for a mortgage to purchase a home decreased by 4% last week compared to the week prior, after seasonal adjustments. Notably, this volume was only 3% higher than the same week a year ago, even though interest rates at that time were significantly higher.

Mortgage Rates Remain Relatively Steady

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (of $806,500 or less) saw a slight decrease, falling to 6.89% from 6.90%. Points on these loans with a 20% down payment increased marginally. This rate remains 40 basis points lower than the corresponding week in the previous year.

Economic Uncertainty Weighs on Buyers

Joel Kan, the MBA's vice president and deputy chief economist, pointed to broader economic uncertainty and emerging signs of labor market weakness as key factors contributing to the subdued purchase application activity. He noted that this decline has brought purchase applications to their slowest pace since February. Interestingly, applications for FHA loans, often favored by first-time homebuyers, experienced a less significant decrease.

Refinance Activity Also Drops

Applications to refinance an existing home loan also saw a 4% decrease for the week. Despite this recent dip, refinance volume remained considerably higher (42%) than the same week one year ago. Kan suggested that the stability of mortgage rates near 7% is causing borrowers to await a more substantial decrease before pursuing refinancing. The decline in refinancing activity has also led to a decrease in the average refinance loan size.

Economic Data Could Trigger Rate Movement

Looking ahead, mortgage rates have remained relatively stable at the start of the current week. However, this could change as a significant amount of economic data is scheduled for release starting on Wednesday and culminating with the crucial monthly employment report on Friday. This data could potentially influence the direction of interest rates in the near term.

‍