Further Interest Rate Declines Boosts Mortgage Activity

A sharp decline in interest rates gave a boost to mortgage activity in the December 7 week, with purchase applications for home mortgages rising a seasonally adjusted 3 percent from the prior week and their year-on-year unadjusted gain increasing by 3.8 percentage points to 4 percent. Applications for refinancing increased by 2 percent, raising the refinance share of mortgage activity to 41.5 percent, the highest level since March. Back below the key psychological 5 percent level, the average interest rate on 30-year fixed-rate conforming mortgages ($453,100 or less) fell 12 basis points from the prior week to 4.96 percent, the lowest level since September thanks to the largest single week drop this year. The revival in purchase applications (from minus 5 percent year-on-year at the start of November to plus 4 percent this week) has been driven by a 21 basis point drop in mortgage rates since their peak last month, and is welcome news to a housing market that has reacted to rising interest rates with progressive weakness this year.