WASHINGTON — Mortgage rates declined for a third consecutive week, boosting borrowing demand and offering tentative signs of renewed momentum in the spring housing market, while a separate report suggests more homeowners are beginning to list properties despite holding historically low mortgage rates.
Total mortgage application volume rose 7.9% last week compared with the prior week, according to the Mortgage Bankers Association, which cited increased demand from both homebuyers and homeowners seeking to refinance.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less fell to 6.35% from 6.42%, with points decreasing to 0.61 from 0.62 for loans with a 20% down payment, the MBA reported.
“Mortgage rates declined last week as financial markets responded positively to the Middle East ceasefire and the lower trend in oil prices,” MBA Senior Vice President and Chief Economist Mike Fratantoni said in a statement.
Purchase Mortgage Apps Increase
Applications to purchase a home increased 10% for the week and were 14% higher than a year earlier, led by an 11% gain in conventional purchase loans. Refinance applications rose 6% week over week and were 52% higher than the same period last year, when rates were roughly 55 basis points higher, according to the MBA data.
“Despite the geopolitical uncertainty, housing demand is being supported by a still resilient job market, and homebuyers are experiencing a buyer’s market in most of the country given the higher levels of inventory relative to last year,” Fratantoni said in a statement.
Still, broader housing market dynamics remain mixed. A new report from Coldwell Banker suggests the long-standing “mortgage rate lock-in effect” — in which homeowners are reluctant to sell because they hold lower-rate mortgages — may be beginning to ease, though it continues to constrain supply.
The Coldwell Banker findings, based on a survey of more than 700 real estate agents nationwide, indicate that about one in three home sellers this spring are giving up mortgage rates below 5%.
Subdued Sales
The report comes as existing home sales remain subdued. Data from the National Association of Realtors show sales are down 1% compared with a year earlier, when activity was already near historic lows.
“Inventory remains a major constraint on the market,” NAR Chief Economist Lawrence Yun said in a recent statement, noting that limited supply pushed the median home price to a record high for March and helped the typical homeowner accumulate more than $128,000 in housing wealth over the past six years.
Coldwell Banker described the lock-in effect as one of the most persistent barriers to housing supply. According to recent data cited in the report, just over half of outstanding mortgages carry rates of 4% or lower, and roughly 78% are below 6%.
Even so, the share of mortgages with rates of 6% or higher has been rising, signaling that some buyers and sellers are adapting to elevated borrowing costs. Still, 61% of agents surveyed said the lock-in effect remains a major or moderate factor influencing whether homeowners decide to list.
‘Early Signs’ of Loosening
“Working through the lock-in effect will take time,” Jason Waugh of Coldwell Banker said in a statement. “But we are starting to see early signs that it is loosening, particularly in the Midwest and in the West, which could have a meaningful impact on inventory.”
The report also found that life events are a key driver of new listings, with 36% of agents saying clients are selling due to personal circumstances, even if it means giving up a low mortgage rate.
“Many homeowners are moving because their life circumstances necessitate a change, driving them to list even when they’re losing a historically low mortgage rate in the process,” Waugh said.
