It finally happened. After what felt like an eternity of sky-high borrowing costs, mortgage rates took a dive and buyers along with refi dreamers wasted zero time jumping on it. Last week brought the biggest surge in loan demand since 2022, and people are officially back in the game.
Here is the play-by-play: mortgage rates slid hard, even posting their sharpest daily drop since last summer. According to the Mortgage Bankers Association, overall loan application volume spiked 9.2% for the week ending September 5, and yes, that is even after adjusting for Labor Day BBQs and beach naps.
Purchase loans: Up 7% week-over-week. Joel Kan, MBA’s deputy chief economist, said purchase applications hit their highest level since July and are running more than 20% higher than this time last year. Translation, buyers are smelling opportunity.
Refinances: Up a whopping 12% compared to last week and 34% higher than the same week last year. Nearly half of all applications last week were refis. Homeowners who have been staring at their 7% mortgages could not dial their lenders fast enough.
As of Tuesday, the daily 30-year fixed rate was sitting at 6.29%, with the weekly average closer to 6.56%. That may not feel like the good old days of 3% rates, but it is a whole lot tastier than what we have seen lately.
And if you think lenders were caught off guard, think again. One industry pro admitted his phone was blowing up the second rates dipped. He was gearing up for 14-hour workdays over the weekend. Honestly, it is the kind of problem mortgage folks have been begging for.
ARM Wrestling: Back in the Spotlight
Adjustable-rate mortgages are making a comeback too, since their initial rates are lower than the fixed ones. Of course, ARMs come with the gamble of “hey, your payment could skyrocket later,” but for some buyers, it is the golden ticket to finally locking in a house. Risky? Sure. Popular when rates dip? Absolutely.
But is this party sticking around?
Here is the catch: this little mortgage boom is happening while the economy throws up some not-so-pretty numbers. The latest jobs report showed the employment market is not nearly as strong as everyone thought. That is the trade-off, lower rates often show up hand in hand with a weaker economy.
As mortgage pro Melissa Cohn put it, the bond market is basically waving its arms and shouting, “Hey guys, we are already in a recession.” So yes, lower rates might stick around, but the big question is, will consumers have the income and confidence to keep buying?
Bottom line: borrowers are back in action. Rates slid, the phones lit up, and applications are rolling in like it is 2022 all over again. Just remember, cheap money only helps if you can qualify for it.
