Mortgage Rates Drop Below 7% Leading to Surge in Home-Purchase Applications
In exciting news for prospective homebuyers, mortgage rates have fallen below 7% for the first time in over a month. The Mortgage Bankers Association reported that the index of mortgage applications jumped by 7.1% for the week ending March 8. The average rate on the popular 30-year loan dropped to 6.87% last week, prompting a renewed interest in purchasing homes.
Earlier this year, housing demand had slowed as rates rose, but it is now picking back up as rates fall. Applications for mortgages to purchase homes rose by 5% from the previous week, indicating a growing interest in homeownership. Additionally, refinancing applications saw a 12% increase from the previous week.
The Federal Reserve’s aggressive tightening campaign had previously cooled the interest rate-sensitive housing market. However, economists are now expecting interest rate cuts to begin as early as June. High mortgage rates have limited inventory, as sellers have been reluctant to sell with rates still high.
Currently, available home supply remains down by 34.3% from before the pandemic began in early 2020. This shortage of inventory, coupled with lower mortgage rates, is creating a competitive market for buyers. As interest rates continue to drop, the housing market is expected to see further growth in the coming months.
