Mortgage rates record their biggest drop in more than a year amid signs of weakness in the US economy

Mortgage rates record their biggest drop in more than a year amid signs of weakness in the US economy

Last updated: November 8, 2023 at 7:17 AM ET

First Published: November 8, 2023, 7:10 a.m. ET

The numbers: Mortgage demand rose as interest rates fell sharply on signs of a weakening US economy.

Mortgage rates fell by 25 basis points over the past week, the largest decline since July 2022.

The decline in interest rates provided a small boost to overall mortgage demand. Total Market Composite Index — a measure of the volume of mortgage applications…

Numbers: Mortgage demand rose as interest rates fell sharply against the backdrop of signs of weakness in the US economy.
Mortgage rates fell by 25 basis points over the past week, the largest decline since July 2022.
The decline in interest rates provided a small boost to overall mortgage demand. The Mortgage Bankers Association (MBA) said on Wednesday that the overall Market Composite Index — a measure of the volume of mortgage applications — rose in the latest week.

The market index rose by 2.5% to 165.9 for the week ending November 3 compared to the previous week. A year ago, the index reached 199.9.
Key details: Home buying and refinancing activity has increased as interest rates have fallen.
Buyer demand rose as some consumers jumped in to take advantage of low interest rates. The purchase index – which measures mortgage applications to purchase a home – rose 3% from last week.

Refinancing activity also rose modestly. The refinancing index increased by 1.6%.
The average contract rate for a 30-year mortgage for homes sold for $726,200 or less was 7.61% for the week ending Nov. 3, MBA said. This is down from 7.86% the previous week, the MBA said.
The rate for jumbo loans, or 30-year mortgages for homes sold for more than $726,200, was 7.58%, down from 7.8% the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration fell to 7.36% from 7.57%.
The 15-year bond yield fell to 6.98% from 7.14% compared to the previous week.
The adjustable rate mortgage rate fell to 6.76% from 6.77% last week. ARMs now make up 9.8% of all apps.

The Big Picture: With signs of a weak labor market and the US Federal Reserve indicating a pause in raising interest rates, mortgage rates fell in the last week, falling by 25 basis points. If the economy continues to weaken, interest rates will fall further.
Meanwhile, aspiring homeowners spooked by 8% interest rates likely jumped on the decline, boosting demand for mortgages. Further declines may spur more home buying activity, but that will still be limited by the broader issue of low inventory.
What did the MBA say?“Last week’s decline in interest rates was driven by an update to US Treasury bond issuance, the Fed’s dovish tone in its November FOMC statement, and data indicating a slowing labor market,” Joel Kahn, deputy chief economist and deputy chief economist, said. The MBA president said in a statement.
Market reaction: The yield on the 10-year Treasury note BX:TMUBMUSD10Y was below 4.6% in early morning trading on Wednesday.

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