Joel Kan, MBA’s Vice President and Deputy Chief Economist

US mortgage demand jumps at start of new year despite higher rates

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Mortgage applications in the US increased by 9.9% on the first week of the year, the most in one year, and rebounding sharply from the 10.7% slump from the previous period, the Mortgage Bankers Association (MBA) revealed in its report published on Wednesday (Jan. 10). The figure included an additional adjustment due to New Year’s holiday.

The results are also aligned with expectations that the Federal Reserve is due to commence its rate-cutting cycle in the first quarter, lowering benchmark borrowing costs and making mortgages more accessible to US home buyers.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) ticked up 5 basis points to 6.81%, slightly above the 6.76% from the earlier week but firmly below the 23-year high of nearly 8% from October.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 6.98% from 6.86%. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 6.56% from 6.51%. The average contract interest rate for 15-year fixed-rate mortgages increased to 6.41% from 6.26%. The average contract interest rate for 5/1 ARMs increased to 6.17% from 5.71%.

The MBA’s report also showed an 18.8% surge in applications to refinance a home, outpacing the 6% jump in applications to purchase a home.

“Despite an uptick in mortgage rates to start 2024, applications increased after adjusting for the holiday,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”

The MBA survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts.