Applications to refinance a home loan, which are more rate-sensitive, didn't get a lift either, falling 1 percent, seasonally adjusted, from the previous week. However, they are nearly 52 percent higher than a year ago, when interest rates were higher.
"Markets reacted to the weaker than anticipated job market report by recalibrating their expectations regarding the Fed's next move. Additionally, global investors concerned about the potential for Brexit and its implications have once again led to a flight to safety, driving down Treasury yields," said Michael Fratantoni, chief economist for the MBA. "As a result, conventional mortgage rates dropped to their lowest levels since 2015 last week, while FHA rates dipped to their lowest level since 2013."
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased 3.79 percent, from 3.83 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans.
Homebuyers today are more concerned about credit availability than they are about current interest rates. Rates have been expected to rise for the past year, but every move up is countered by some force pushing them back down. While lenders have started to introduce some new, low down-payment loan products, overall underwriting standards are not expected to ease. A new survey of lenders by Fannie Mae found as much.
"Key survey sentiment indicators suggest that lenders remain cautiously optimistic in their market outlook," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "Additionally, the trend toward easing of credit standards appears to be tapering off, as the vast majority of lenders, around 90 percent, reported plans to keep their credit standards about the same. The survey was conducted before the recent May jobs report, and the weaker reported job gains might potentially temper this optimism."