Homeowners and home buyers race to lock in falling mortgage rates

By Aarthi Swaminathan

The 30-year mortgage fall over the past week after Trump announces the purchase of mortgage-backed securities

Falling rates sparked a jump in mortgage demand.

Mortgage rates fell over the past week, pushing down the 30-year and sparking a big boost in mortgage demand to kick off the year.

Mortgage rates declined after President Donald Trump said that he was directing representatives Fannie Mae (FNMA) and Freddie Mac (FMCCH) to buy mortgage-backed securities.

Thirty-year fixed-rate mortgages fell 7 basis points to 6.18%, according to the Mortgage Bankers Association, an industry group, as of Jan. 9.

The drop is likely to be a boon for many home buyers and even homeowners. The housing market in general has been struggling with a lack of sales over the past year, as home prices and mortgage rates remained too high and out for reach for most home buyers.

Hence the drop in rates sparked a jump not only in refinances but also for purchase mortgages.

Mortgage applications rose 28.5% in the past week.

Purchase activity, which refers to home buyers applying for mortgages to purchase a home, rose 15.9% from the previous week. Refinance activity rose 40.1% from the week before.

In particular, "the average loan size for refinance applications was also higher, as borrowers with larger loan sizes are typically more sensitive to changes in rates," Joel Kan, deputy chief economist at the MBA, said in a statement.

Related: How you could benefit from Trump's plan for buying mortgage bonds

Mortgage rates fall across most loans

Rates fell across most loan types, expect for jumbo mortgages.

The average contract rate for a 30-year mortgage for homes sold for $832,750 or less was 6.18% for the week ending Jan. 9, down 7 basis points from the previous week.

The rate for jumbo loans, or a 30-year mortgage for homes sold for over $832,750, was 6.42%, up 10 basis points from the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was down 1 basis point to 6.08%. Those loans are often used by first-time home buyers.

The average 15-year mortgage rate was down 4 basis points to 5.6%.

The average for a five-year adjustable-rate mortgage was down 48 basis points from the previous week to 5.42%.

-Aarthi Swaminathan

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