This year’s steady decline in mortgage interest rates has taken another step down the ladder over the past week. Rates have dropped all the way to 2.81% , down from 2.87% last week and down from the previous record low of 2.86% in September, according to the Freddie Mac weekly mortgage survey. Those numbers reflect a typical 30-year fixed rate mortgage with 20% down. For a 15-year loan the rates have reached 2.35%.
Applications for mortgages only took the slightest dip, showing an overall decrease of .7% for both purchase and refinance applications combined compared to the week before, according to the Mortgage Bankers Association weekly survey. Both types of applications are still showing strong demand, with purchases seeing a 24% increase year-over-year and refinance applications seeing a 44% increase compared to the same time frame. Refinances made up roughly two-thirds of the application pool, with 65% of the activity coming from the refinance market.
While all this activity reflects a strong demand, there are definite signs that prices are increasing around the country. National data from Redfin
A further sign of prices increasing is last week’s 11% jump in the number of applications for VA loans, which is higher than usual for this type of product. Since those loans can often be approved with no downpayment, or a much smaller one than would be required under a traditional mortgage, the increase in applications suggests buyers are having to find more favorable types of financing to qualify for a home.
These price increases are a combination of a limited supply of homes on the market and sellers who know that buyers are coming into the transaction with more buying power since their monthly payments won’t be as high. With so few homes on the market, sellers are taking advantage of their leverage while they can.
“Housing supply is a challenge for many aspiring buyers, but activity should continue to stay strong the rest of the year,” says Joel Kan, Mortgage Bankers Association Associate Vice President of Economic and Industry Forecasting.