Prime Highlights: 

Mortgage rates for 30-year fixed loans dropped to 6.88%, the lowest since mid-December. 

Despite the rate decrease, overall mortgage application volume fell by 1.2% week-over-week. 

Refinancing applications decreased by 4%, although they remain 45% higher than the same time last year. 

Key Background: 

Mortgage interest rates have dropped to their lowest levels since mid-December, but demand for home loans remains subdued, signaling ongoing challenges in the housing market. According to data from the Mortgage Bankers Association (MBA), the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances (up to $766,550) decreased to 6.88% from 6.93%. Despite this reduction, mortgage application volume fell by 1.2% week-over-week. 

The decline in mortgage rates comes amid lower Treasury yields, driven by softer consumer spending data. As a result, mortgage rates have edged down, offering some relief to potential buyers. However, this decrease has not spurred a notable uptick in applications. Applications for refinancing, which had surged earlier in January and February, dropped by 4% during the week, although they remained 45% higher compared to the same week last year. 

While the mortgage refinancing market saw some slowdown, applications for purchasing homes remained stable, increasing by 3% compared to the same period last year. Despite a slight increase in housing inventory, partly due to homes staying on the market longer, home prices have not seen significant reductions, with inventory still historically low. 

Looking ahead, mortgage rates have continued to drop slightly this week, with top-tier rates falling by 0.22%. However, experts suggest that while this is a minor change, mortgage rates have been moving within a narrow range for several weeks. According to Matthew Graham, COO of Mortgage News Daily, the shift is largely attributed to market expectations surrounding global economic growth and domestic tariffs. Overall, although mortgage rates are at a two-month low, the housing market remains constrained by high prices, low inventory, and cautious buyer sentiment. 

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