Mortgage rates reach lowest level since February 2023

Mortgage rates fell for the sixth week in a row last week, but demand for mortgages still seems to be waiting for something bigger.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell from 6.43% to 6.29%, according to the Mortgage Bankers Association, with points for loans with a 20% down payment falling from 0.56 to 0.55 (including the origination fee). That's the lowest level since February 2023 and nearly a full percentage point lower than the same week a year ago.

“U.S. Treasury yields are reacting to data that paint a picture of easing inflation, a weakening labor market and the expected first rate cut by the Federal Reserve later this month,” said Joel Kan, MBA vice president and deputy chief economist.

However, overall mortgage demand rose only 1.4 percent this week, according to the MBA's seasonally adjusted index. The results also included an adjustment for Labor Day.

Debt restructuring applications were up just 1% week-over-week, but were 106% higher than a year ago. That may sound like a massive increase, but the numbers were so low last year that even with that big increase, debt restructuring is still historically low.

“The potential for refinancing is still relatively limited, as many borrowers are still paying interest rates below 5 percent. It is a positive development that there are homeowners who can benefit from refinancing as interest rates continue to fall,” Kan added.

Most of those refinancing their homes probably bought their homes in the last two years, when interest rates rose significantly from record lows.

Applications for mortgages to purchase a home rose 2% during the week, but were 3% lower than the same week a year ago.

“Despite the decline in interest rates, affordability issues and other factors such as limited inventory may still hamper purchasing decisions,” Kan said.

Mortgage rates continued to fall earlier this week, according to a separate survey by Mortgage News Daily magazine, but Wednesday's monthly release of the Consumer Price Index, a measure of inflation, could have a greater impact on interest rate movements in either direction.

“If it weren't for the fact that this is one of the few major reports released in the blackout period before a Fed rate cut, where the size of the cut is still under debate, we would safely say that the Consumer Price Index (CPI) is almost completely irrelevant. But because of all that 'stuff', we can't rule out a volatile reaction to a large over/undershoot of expectations,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.

Correction: This story has been updated to correct that mortgage rates hit their lowest level since February 2023. The headline of an earlier version misstated the year.