Mortgage rates dip below 7%. Recent homeowners race to refinance.

By Aarthi Swaminathan

Homeowners who bought near the peak of rates are refinancing now, industry-group says

The numbers: Mortgage applications inched up, driven by an increase in refinances by homeowners with near-peak rates.

With the 30-year mortgage dipping below 7% in the latest week, homeowners who took on mortgages when rates were at or near 8% refinanced their loans to bring down interest costs.

Consequently, the overall market-composite index - a measure of mortgage application volume - rose in the last week, according to the Mortgage Bankers Association (MBA) said on Wednesday.

The market index rose 7.1% to 201.5 for the week ending March 8 from a week ago. A year ago, the index stood at 214.5.

Key details: The purchase index - which measures mortgage applications for purchasing a home - rose 4.7% from a week ago.

The refinance index rose 12.2%. In particular, homeowners with government-backed mortgages were refinancing actively, with that index rising 23.6%.

The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 6.84% for the week ending March 8. That's down from 7.02% from the week before.

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 7.04%, down from 7.21% the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.77%, down from 6.86% a week ago.

The 15-year fell to 6.37% from 6.66% from the previous week.

The rate for adjustable-rate mortgages was unchanged at 6.38% from last week. Demand for adjustable-rate mortgages also rose 6% from a week ago.

The big picture: The housing market is about to head into spring home-buying season, and mortgage rates are one of the two key factors that will shape how it shakes out. The other is the supply of new home listings.

If rates stay below 7%, home buyers may be pushed into the market. But with a hotter-than-expected inflation report in February, rates are poised to inch up again.

So the big question will be how sensitive home buyers are to mortgage rate fluctuations over the next few weeks.

What the MBA said: Rates fell "because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months" Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association, said in a statement.

On the refinancing activity rising sharply in the latest week, Fratantoni said that despite the increase, "the level of refinance activity remains quite low, and we expect that most of this activity reflects borrowers who took out a loan at or near the peak of rates in the past two years."

-Aarthi Swaminathan

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03-13-24 0700ET

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