US mortgage rates dropped last week by the most since February, enticing homeowners to step up refinancing.
The contract rate on a 30-year mortgage declined 10 basis points to 6.67% in the week ended Aug. 8, according to Mortgage Bankers Association data released Wednesday. The rate on a 15-year mortgage retreated below 6% for the first time in four months — matching the lowest level since October.
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Mortgage rates tend to track moves in the Treasury market, and the yield on the 10-year note tumbled at the start of the month in the wake of weak employment data. That report, which included downward revisions to prior months, boosted the odds that the Federal Reserve will lower interest rates next month.
MBA's measure of refinancing jumped 23% from the prior week to the second-highest level since early October. The index of home-purchase applications rose a more modest 1.4%.
A sustained decline in home-financing costs would help breathe fresh life into a struggling housing market. However, stubbornly high mortgage rates and steadily rising home prices have buffeted a resale market where purchases are hovering near 15-year lows. For first-time homebuyers, the National Association of Realtors affordability index is near the lowest in records back to 1986.
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There are, however, indications of modest relief in the housing market. According to real estate brokerage Redfin, the income needed to afford a home has declined in 11 of the 50 most populous US metropolitan areas compared to last year.
Builders, meanwhile, are using a variety of incentives to help reduce a multiyear high in new-housing inventory.
The MBA survey, which has been conducted weekly since 1990, uses responses from mortgage bankers, commercial banks and thrifts. The data cover more than 75% of all retail residential mortgage applications in the US.
