Another record low mortgage rate just caused mortgage demand to jump
Mortgage interest rates have set record lows more than a dozen times this year, and last week there was yet another. That caused mortgage application volume to increase 3.9% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Refinance applications led the way, climbing 5% for the week to the highest pace since last April. Volume was 79% higher than the same week one year ago. The refinance share of mortgage activity increased to 71.1% of total applications from 69.8% the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to a survey low of 2.92% from 2.99%, with points falling to 0.35 from 0.37 (including the origination fee) for loans with a 20% down payment.
“Weekly mortgage rate volatility has emerged again, as markets respond to fiscal policy uncertainty and a resurgence in Covid-19 cases around the country,” said Joel Kan, MBA’s associate vice president of industry and economic forecasting.
While more than 4 million borrowers have already refinanced their home loans so far this year, over 19 million more could still save substantially on their monthly payments through a refinance, according to a recent calculation by Black Knight, a mortgage technology and data provider. Today’s average mortgage rate is about a full percentage point lower than it was a year ago.
Homebuyers are also getting added incentive from today’s rates, despite sharp increases in home prices. Mortgage applications to purchase a home rose 4% for the week and were 19% higher than the same week one year ago.
“Amidst strong competition for a limited supply of homes for sale, as well as rapidly increasing home prices, purchase applications increased for both conventional and government borrowers. Furthermore, purchase activity has surpassed year-ago levels for over six months,” Kan said.