By CNBC, Diana Olick
For weeks interest rates are steadily lowering down.
The falling mortgage rates sparks application of mortgage applications nearly to the 40% mark than a year ago. This is largely because of lower mortgage rates are strengthening the refinance market.
Rates have fallen in three of the last four weeks and are now in the lowest levels since September 2017. The average contract interest for conventional loans are down from 4.14% to 4.06%. These are on loans with a 20% down payment.
The drop spurred more refinance activity, with applications rising for the week. As home values are on the rise, more borrowers become eligible to refinance and so each drop on rates bring outs more business for lenders.
Mortgage applications to purchase a home, however, fell due to higher home valuations. Buyers are less sensitive to weekly changes in rates moves. Existing home sales did move slightly higher in May than April, as rates fell. Buyers continue to face high prices and low supply of affordable homes.
Sales of new homes fell unexpectedly sharply in May, despite lower mortgage rate. Affordability appeared to be the culprit, although some factors are more into play the drop in weaker consumer sentiment in the overall economic outlook.