“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023,” deputy chief economist Joel Kan said in MBA’s report. “The 30-year fixed mortgage rate edged higher last week and ended 2023 at 6.76%, over a percentage point lower than its recent peak of 7.9% in October 2023.
Read more: Reflecting on 2023 and the mortgage market
“The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12% lower than a year ago. Refinance applications were still at very low levels but were 15% higher than a year ago.”
Kan also noted the persistent challenges faced by the housing market, primarily due to limited home availability. “The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months to come,” he stated.
In other findings, the refinance share of mortgage activity decreased to 36.3% of total applications from 39.4% the previous week. The adjustable-rate mortgage (ARM) share of activity also saw a reduction, amounting to 6% of total applications.
