Weekly mortgage refinance applications spike 15% as interest rates plunge to lowest in nearly 4 year
CNBC | Diana Olick
Mortgage rates last week hit their lowest level since October 2016.
Refinance applications, which are most sensitive to weekly rate moves, jumped 15% for the week and were 183% higher than a year ago. Demand hit the highest level since June 2013.
Homeowners rushed to take advantage of the sharp drop in interest rates last week.
Refinance demand pushed mortgage application volume up 5% for the week to the highest level since 2013, according to the Mortgage Bankers Association’s seasonally adjusted index. Purchase demand, however, dropped.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71% from 3.81%, with points remaining unchanged at 0.28 (including the origination fee) for loans with a 20% down payment. That is the lowest level since October 2016. The rate was 98 basis points higher one year ago.
“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Refinance applications, which are most sensitive to weekly rate moves, jumped 15% for the week and were 183% higher than a year ago. Demand hit the highest level since June 2013. The average loan amount also spiked, as homeowners with jumbo loans have more to gain from weekly rate declines. The refinance share of mortgage activity increased to 64.5% of total applications from 60.4% the previous week.
Mortgage applications to purchase a home decreased 10% from one week earlier, but were 11% higher annually. Today’s buyers are facing a tight and increasingly pricey housing market. The supply of homes for sale fell to a record low at the end of last year, and price gains, which had been easing a bit, have reaccelerated again.
“Prospective buyers weren’t as responsive to the decline in mortgage rates — likely because of suppressed supply levels,” Kan said. “Purchase applications took a step back, but still remained 7.7% higher than a year ago.”
Mortgage rates have been falling on fears over the coronavirus hitting financial markets. Rates, however, finally turned slightly higher Tuesday, as the stock market bounced higher.
“The bigger issue is merely the risk that today [Tuesday] marks some sort of turning point in the bigger picture,” said Matthew Graham, chief operating officer of Mortgage News Daily. “It’s too soon to know if that’s what this is, but it’s definitely the first obvious candidate since the coronavirus rate-drop began.”
MARKET INSIGHT iCovest Capital Group ("iCG") brings a unique value proposition to your home. While we are fully capable of keeping in line with the most competitive rates and best financial products available today, our incredible market insight and loan management strategies offered freely in counsel can help you explore your ability to not only restructure your family's financial position, but determine the fastest path to eliminating your debt obligations. By presenting strategies that could significantly increase your monthly cash flow, iCG can lead you to opportunities that accumulate appreciative assets while building residual wealth vehicles. iCG Strategic Philanthropists are qualified to show you how to leverage you're already spending today, to generate wealth tomorrow. Whether you need help negotiating a mortgage or buying a new home, iCG can manage all of your mortgage needs. Our Strategic Philanthropists will take the complications out of the process, and you’ll be surprised by how easy your life becomes once we work together— contact a Strategic Philanthropist today, and find out how many more services we have that can help you to achieve your financial goals. Learn to Harness the Power of Your Mortgage Today!