Although mortgage rates have not fallen as rapidly as potential homebuyers had hoped, there has been a slight uptick in the number of mortgage applications. Data from the Mortgage Bankers Association (MBA) Weekly Mortgage Application Survey for the week ending November 24 showed that weekly mortgage applications increased by 0.3% from the previous month.
“Mortgage rates have been gradually declining over the past month, which has spurred growth in mortgage demand,” said Mortgage Bankers Association President and CEO Bob Broeksmit in a statement. “While applications remain below year-ago levels, they have been on the rise for four consecutive weeks.”
Capital Economics anticipates this trend will continue. “Back in October, mortgage applications hit a 28-year low, driven by mortgage rates as high as 8%,” Ryan tells Fortune. “As rates have dropped, affordability has improved, and fewer potential homebuyers will hesitate to apply for a mortgage.”
This means that mortgage lending will dip over the next few years as mortgage rates continue to fall. Aaron Gordon, a veteran mortgage loan officer with over 20 years of experience, is more optimistic. He believes that as aging baby boomers transition to retirement communities or facilities, the lock-in effect of high mortgage rates will begin to diminish, a phenomenon sometimes referred to as the “silver tsunami.” Gordon also predicts that higher renovation costs will prompt more homeowners to consider moving. Home equity loan interest rates have risen by 9% or more, deterring people from making extensive home improvements.
In other words, homeowners who secured 3% or 4% mortgage rates during the pandemic are starting to grow weary of their current homes. Gordon, branch manager of Guild Mortgage, tells Fortune that many homeowners, particularly those who have benefited from rising home prices, will eventually succumb to relatively higher mortgage rates.
“Many homeowners will decide to pocket the high profits, sell their current home, and buy another,” he said. “These buyers will overlook higher interest rates and plan to refinance when interest rates eventually fall. As supply and demand grow, lower interest rates mean more mortgage applications.”