Applications to take out a mortgage are on the rise
More homebuyers applied for mortgages last week, according to the latest reading of the Mortgage Bankers Association's Purchase Index.
In the week ended Aug. 22, the index measuring applications for purchase mortgages increased 2%, marking the strongest week in more than a month. The index was also 25% higher than the same time a year earlier.
"Prospective buyers appear to be less sensitive to rates at these levels and are more active, bolstered by more inventory and cooling home-price growth in many parts of the country," Joel Kan, the group's vice president and deputy chief economist, said in a statement.
The 30-year, fixed-rate mortgage averaged 6.58% as of Aug. 21, according to mortgage giant Freddie Mac.
Homebuyers need mortgage rate drop before refinancing
Most buyers who purchased a home this year would need at least a 0.75 percentage point mortgage rate drop if they want to see refinance gains within three years, according to a new analysis from Clarence, Missouri-based Neighbors Bank.
"As a rule of thumb, borrowers typically look for a break-even point — the moment when savings from a lower rate outweigh upfront closing costs — within about three years to make refinancing worthwhile," the report released Wednesday explained. "But the data shows that many buyers are unlikely to hit that threshold unless rates decline more significantly."
For example, a 0.25 percentage point drop would leave a 2025 borrower more than $2,400 underwater after three years.
Jake Vehige, president of mortgage lending at Neighbors Bank, said the study exemplifies why it might not be worth it for prospective buyers to wait for lower mortgage rates.
"Many assume that any drop in rates is enough to justify refinancing, but the math tells a different story," he said in a statement. "Unless you're seeing a significant drop, refinancing may not make sense right away. The break-even point isn't just about the rate. It's about how long you plan to stay in your home, how much you pay upfront, and where you live."
Tariffs on India could make furniture more expensive
An additional 25% tariff on imports from India took effect Wednesday morning, bringing the total tax on goods from the country to 50%. The White House has said the new policy is a means to punish India for importing Russian oil.
A report from the Global Trade Research Initiative released Tuesday revealed that the tariff will directly impact textiles, furniture and rugs, noting that "exports from these sectors could plunge 70%."
Experts have warned that those effects are likely to trickle down to consumers through higher prices. Earlier this year, for example, when the White House first introduced its trade policies, Julia Wilson, consumer and retail strategy leader at advisory firm KPMG, told Homes.com that "the initial thought is that the consumer will hurt the most."
