Mortgage Rates See Biggest Decline in a Year; Applications Rise

WASHINGTON–Mortgage rates saw the biggest one-week drop in over a year last week, causing the first increase in mortgage demand in a month, according to new data.

Total mortgage application volume rose 2.5% last week, compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.

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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 7.61% from 7.86%, with points falling to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment.

The Rate Driver

"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," Joel Kan, vice president and deputy chief economist at the MBA, told CNBC.

According to the data, applications to refinance a home loan increased 2% for the week and were 7% lower than the same week one year ago.

Applications for a mortgage to purchase a home rose 3% for the week but were 20% lower than the same week a year ago.

Supply Remains Low

“The decline in interest rates is still not enough to offset sky-high home prices, which are still rising due to the very low supply of houses for sale,” CNBC noted.