Since mortgage rates on traditional loans aren’t changing much, it’s difficult for current homeowners to get any savings they can. However, the Federal Housing Administration’s (FHA) mortgage insurance-required loans are offering a way out, according to a new CNBC article.
The Mortgage Bankers Association’s (MBA) seasonally adjusted index shows that the number of applications for home loan refinancing increased by 14% last week over the previous week. Compared to the same week last year, the volume was an estimated 88% greater. Refinances now account for approximately 58.2% of all applications, up from 53.0% the week before.
As the FHA interest rate for 30-year fixed-rate loans dropped to 6.08%, the lowest level since September 2024, demand for FHA refinances increased by 24% for the week.
On the other hand, for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less, the average rate rose from 6.32% to 6.33%, and for loans with a 20% down payment, the points climbed from 0.58 to 0.60, including the origination fee.
“The expectation was that mortgage rates for conventional loans would have come down more by now, but that hasn’t happened for several reasons which would require a whole different article,” said Diana Olick, Senior Real Estate and Climate Correspondent at CNBC. “They may even go up sharply … as they did the last two times the Fed cut its rates. So, what’s a consumer to do but head for whatever loan offers the lowest rate.”
Mortgage Apps, Lending & Homebuyer Hopes
Mortgage applications to buy a home decreased by 2% during the week, although they were 19% more than they were during the same period last year. For further discounts, prospective purchasers are now looking to the FHA.
“Conventional purchase applications were down for the week, but there was a 5% increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans,” said Joel Kan, VP and Deputy Chief Economist for the MBA, in a release.
Following Wednesday’s meeting, markets are currently awaiting commentary from the chair of the Federal Reserve. Although it is generally anticipated that the Fed will lower its overnight borrowing rate, mortgage rates increased significantly the last two times it did so. According to a different study conducted by Mortgage News Daily, mortgage rates on conventional loans increased even further to begin this week.
“The cut itself is not the news the market is waiting for. Rather, traders are interested to see each Fed member’s rate outlook via the quarterly release of the Fed’s economic projections,” wrote Matthew Graham, COO at Mortgage News Daily. “In addition, every Fed meeting includes a press conference with the Fed Chair, and bonds have often made the biggest moves in response.”
