The number of applications for mortgages spiked in the first week of the new year, as a number of factors are contributing to what appears to be a renewed interest in homeownership coming into 2024.
A recent announcement by the U.S. Federal Reserve that rate cuts are expected in the months ahead appears to be part of why data released on Wednesday by the Mortgage Bankers Association showed a 9.9% increase in mortgage filings.
Data showed mortgage rates trending in a steady downward line since they reached their highest level of the year at the end of October at 7.79%. According to Freddie Mac, an average mortgage rate for a 30-year fixed loan is now over a percentage point lower, at 6.62%.
SEE MORE: US long-term mortgage rates increase for the first time since October
And the increase in applications wasn't just for new mortgages, but also included refinance applications, which shot up by 19% over the previous week. They also stood at 30% over the same period last year.
Joel Kan, the MBA's deputy chief economist, said, "The increase in purchase and refinance applications for both conventional and government loans is promising to start the year, but was likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low."
Analysts believe some U.S. lenders may have had a backlog of applications they were working through, and were able to complete processing those in the days after the holiday, which could be a contributing factor to the spike.
Housing industry leaders saw some of the worst home affordability in a generation in 2023.
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