Mortgage Rates See Biggest Weekly Drop in Over a Year, Sparking Increase in Mortgage Demand

Samantha Miller

Mortgage rates experienced their largest single-week decline in over 12 months last week, leading to the first increase in mortgage application demand in a month, according to new data from the Mortgage Bankers Association (MBA).

The Drop in Rates

The average 30-year fixed mortgage rate for conforming loan balances of $726,200 or less fell to 7.61% last week, down from 7.86% the previous week, according to the MBA’s Weekly Mortgage Applications Survey. Points on 30-year fixed loans also decreased to 0.69 from 0.73.

This 25 basis point drop was the largest single-week decline going back to early 2021 and was driven by a combination of factors, said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“Last week’s decrease in rates was driven by the U.S. Treasury’s issuance update, the Fed striking a dovish tone in the November FOMC statement, and data indicating a slower job market,” Kan explained.

The 10-year Treasury yield, which mortgage rates tend to follow, fell last week after the Treasury announced it would be reducing the sizes of its longer-term note auctions due to the government’s improving fiscal situation. This led to a drop in longer-term yields.

Additionally, in their November policy statement, the Federal Reserve signaled they may slow the pace of future interest rate hikes depending on how incoming data affects the economic outlook. This more dovish tone reassured markets and contributed to the decline in Treasury yields and mortgage rates.

Finally, the October jobs report showed a slowdown in hiring, easing some of the wage and inflation pressures the Fed has been focused on tamping down. This provided further support for mortgage rates to move lower.

Increase in Mortgage Demand

In response to last week’s more favorable rate environment, mortgage application volume rose 2.5% compared to the previous week, the MBA survey showed.

This broke a streak of four consecutive weekly declines and marked the first increase in demand since early October.

Refinance Demand Rises But Remains Subdued

With rates dropping back near levels from a year ago, refinance application volume increased 2% last week. However, it was still 7% lower than the same week in 2021.

The refinance market remains subdued as most homeowners already took advantage of record low rates in 2020 and 2021. According to the MBA, over 75% of outstanding mortgages have rates below 4%.

With rates still historically high compared to recent years, there is little incentive for these borrowers to refinance and give up their low rates.

Purchase Demand Rebounds But Remains Down Significantly From 2021

For homebuyers, mortgage purchase applications rose 3% last week and were up over 9% from two weeks ago when they hit their lowest level since 2015.

However, purchase volume remained 20% lower than the same week a year ago, as home affordability continues to deteriorate due to high home prices and rising mortgage rates this year.

“The average loan size for purchase applications increased to $413,500, as homebuyers remain persisted in purchasing higher-priced homes despite higher mortgage rates,” said Kan.

The median existing home sale price in September was $384,800, up 8.4% from a year ago, according to the National Association of Realtors. Meanwhile, mortgage rates have risen over 3 percentage points in the past year.

This rapid rise in rates and persistent home price growth has crushed buyer affordability. Combined with still-low housing inventory, the weakening affordability continues to constrain purchase demand.

Outlook for Rates This Week

After last week’s volatility, mortgage rates started this week slightly higher but remain below the highs reached in late October.

Kan noted this week holds fewer economic events or reports that typically influence rate movements.

Last week, the combination of the Fed decision and October employment report sparked increased market fluctuations. But this week, the calendar is more muted.

Therefore, barring any major developments in the broader economy or financial markets, mortgage rates may stabilize near current levels in the coming days. But forecasting rate movements remains challenging.

“Markets remain volatile, so we expect more rate swings as economic data continues to give mixed signals about the economy,” said Kan. “The MBA still forecasts mortgage rates to end the year near 7%.”

If rates stabilize around current levels, we could see purchase demand start to edge up, given the increased affordability compared to the recent record highs. However, the housing market will still face challenges until supply improves and home price growth moderates.

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Samantha Miller is a business and finance journalist with over 10 years of experience covering the latest news and trends shaping the corporate landscape. She began her career at The Wall Street Journal, where she reported on major companies and industry developments. Now, Samantha serve as a senior business writer for, profiling influential executives and providing in-depth analysis on business and financial topics.
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