Surge in Mortgage Demand Indicates Growing Interest Amidst Lower Rates

In a significant turn of events, the demand for mortgages has experienced a remarkable surge, reaching its zenith in a span of five weeks. This noteworthy development has been spurred by a pronounced dip in interest rates, prompting both current homeowners and potential homebuyers to make their strategic moves, albeit at a measured and calculated pace.

Mortgage Demand on the Rise:

According to the latest data from the Mortgage Bankers Association’s seasonally adjusted index, there has been a notable 2.8% uptick in mortgage demand over the past week, marking the second consecutive week of gains. This positive trajectory follows a sharp decline in the previous week, showcasing a resilient response to the evolving interest rate landscape.

Stable Interest Rates Fueling Momentum:

Despite a midweek dip in Treasury rates, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained steadfast at 7.61%. Notably, points decreased slightly to 0.67 from 0.69, inclusive of the origination fee, for loans with a 20% down payment. This stability in interest rates amid fluctuating market conditions underscores the robustness of the current mortgage landscape.

Refinancing Trends and Homebuying Activity:

Refinancing applications experienced a commendable 2% uptick for the week, signaling a 7% increase compared to the same week a year ago. However, the allure of refinancing is somewhat tempered by the fact that current mortgage rates do not significantly differ from those of November last year. The legacy of record low rates during the initial years of the Covid-19 pandemic continues to provide many borrowers with substantially lower interest rates, creating a nuanced landscape for financial decision-making.

On the other hand, applications for mortgages to purchase homes saw a noteworthy 3% increase from the previous week. Despite this positive momentum, they still lag by 12% compared to the same week last year. Lower rates offer some relief, yet the formidable challenges of escalating home prices and a persistent shortage of homes remain substantial obstacles for prospective buyers.

Expert Insights:

Joel Kan, MBA’s vice president and deputy chief economist, shed light on the situation, stating, “Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still posing challenges for many prospective homebuyers and current homeowners.” Kan’s nuanced perspective underscores the intricacies involved in navigating the current real estate landscape.

Market Influences:

The recent decline in mortgage rates is attributed to a significant bond market rally, sparked by a monthly inflation report that came in lower than analysts had predicted. This development highlights the interconnectedness of economic indicators and their profound impact on the mortgage landscape, showcasing the delicate balance that defines market dynamics.


In conclusion, the recent surge in mortgage demand, fueled by a conducive interest rate environment, serves as a testament to the resilience of the real estate market. However, challenges persist, with affordability concerns and a constrained housing supply tempering the overall growth. As the market continues to navigate these dynamics, stakeholders remain attuned to the ever-shifting currents of mortgage trends, positioning themselves strategically in this dynamic and evolving landscape.

Mortgage rates continue their upward rise for 5 straight weeks

Mortgage Despite a new year, the fight against inflation continues as it remains stubbornly unpredictable.

For the fifth consecutive week, mortgage rates inched toward 7%, and the Federal Reserve suggested that rates will continue increasing.

Fixed-rate average

According to Freddie Mac data released on Thursday, the 30-year fixed-rate mortgage hit an average of 6.73% in the week ending March 9.

A week before, the fixed-rate mortgage was lower at 6.65%.

Last year, the 30-year fixed rate was 3.85%.

It peaked at 7.08% in November, but the rates started dropping.

Despite the positive progress, rates started climbing again in February.

In the past month, the fixed-rate mortgage rose half a percentage point.

The robust economic data suggests that the Federal Reserve has more to do in the battle against inflation and will likely continue hiking the benchmark lending rate.

“Mortgage rates continue their upward trajectory as the Federal Reserve signals a more aggressive stance on monetary policy,” noted Sam Khater, a chief economist from Freddie Mac.

“Overall, consumers are spending in sectors that are not interest rate-sensitive, such as travel and dining out.”

“However, rate-sensitive sectors, such as housing, continue to be adversely affected. As a result, would-be homebuyers continue to face the compounding challenges of affordability and low inventory.”

The average mortgage rate is based on the mortgage applications Freddie Mac receives from thousands of lenders across the United States.

It only covers borrowers who give a down payment of 20% with excellent credit scores.

Rate hikes confirmed to continue

At the onset of 2023, inflation showed signs of cooling off.

However, substantial employment numbers and a rising Consumer Price Index showed that inflation was still around and remained stubbornly high.

On Tuesday, Federal Reserve Chairman Jerome Powell spoke to Congress, saying the central bank will likely raise interest rates higher than before.

Economist Jiayi Xu of said:

“While last month Fed officials said that a smaller increase in the federal funds rate would help create a soft landing for the economy, Powell’s testimony on Tuesday made it clear that the central bank is prepared to return to a faster pace of rate increases if the incoming February economic indicators remain strong.”

She said the decision suggests that investors weren’t fully prepared as they are anxious about the Federal Reserve’s next actions.

The Fed has another rate-setting meeting on March 21 – March 22, with the possibility of another half-point rate in the cards.

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“Uncertainty about how high rates will go and how long they will remain elevated makes it challenging for investors to make well-informed decisions,” said Xu.

“Therefore, it’s crucial to keep a close eye on the latest developments from the Federal Reserve.”

Although the Fed doesn’t set the interest rates borrowers pay on mortgages directly, its actions still influence them.

Mortgage rates tend to track the yield on 10-year US Treasury bonds.

It moves based on anticipation of the Fed’s actions, what it actually does, and how investors react.

When Treasury yields increase, mortgage rates also go up; when they decline, so do mortgage rates.

Housing market

The rising mortgage rates have slowed down the spring selling season.

According to the Mortgage Bankers Association, applications for a mortgage slightly rose last week following three weeks of declines.

As a result, the activity is muted.

Bob Broeksmit, the president and CEO of MBA, said:

“Even with this jump in activity, both purchase and refinance applications remain well below year-ago levels when rates were much lower.”

“The recent increase in mortgage rates, right at the start of the busy spring buying season, could cause prospective buyers to delay decisions until rates moderate.”

According to Fannie Mae’s survey, homebuyer sentiment fell to record lows in February.

Following three months of improvement, sentiment dropped and returned the index closer to its all-time survey low from October.

The most notable drops were associated with job security and home-selling conditions.

“While the current housing market may not look promising for sellers due to factors such as an increasing number of unsold homes, longer time on market, and decelerating price growth driven by high mortgage rates, there are still opportunities to be found,” said Xu.

For example, she noted that recent sales data shows the share of first-time homebuyers is higher than last year.

“As a result, sellers with starter homes may see robust demand and retain some bargaining power.”

Additionally, Xu said the lasting presence of hybrid working models offers more flexibility for homebuyers choosing where to live.

Instead of competing for a home in dense, central areas, buyers will move away from work if they don’t commute to work every day.

“This trend could make homes with easy access to public transportation systems more attractive to home buyers, which, in turn, enhances bargaining power for the sellers,” said Xu.

She also said that sellers who are also buyers could leverage their record-high equity even if they have to adjust expectations to lower asking prices.