With interest rates nearing all-time lows, borrowers seem to be in quite a hurry to refinance their mortgage.
Case in point: mortgage applications jumped 15.1% from one week prior, according to the Mortgage Bankers Association.
The organization explained this week’s reading includes an adjustment for last week’s Presidents’ Day holiday.
Mike Fratantoni, MBA’s senior vice president and chief economist attributes this week’s spike to the nation’s low-interest-rate environment.
“The 30-year fixed-rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility,” Fratantoni said. “Refinance demand jumped as a result, with conventional refinance applications increasing more than 30%.”
Given the recent drop in Treasury rates, Fratantoni said the MBA now expects refinance activity to increase until fears subside, and rates stabilize.
According to the organization, the Refinance Index increased 26% this week and was 224% higher than the same week in 2019.
The refinance share of mortgage activity was 66.2% of total applications, rising from 60.8% the previous week, the MBA said.
When it comes to purchasing volume, which slightly declined this week, Fratantoni said the market is likely to reignite as spring approaches.
“We are now at the start of the spring homebuying season. While purchase applications were down a bit for the week, they are still up about 10% from a year ago, “he said. “The next few weeks are key in whether these low mortgage rates bring in more buyers, or if economic uncertainty causes some home shoppers to temporarily delay their search.”
According to the MBA, the seasonally adjusted Purchase Index fell 3% this week, while the unadjusted purchase index increased 11% from last week and remains 10% higher than a year ago.
Here is a more detailed breakdown of this week’s mortgage application data:
- The adjustable-rate mortgage share of activity increased to 6.4% of total applications.
- The Federal Housing Administration share of mortgage apps fell to 9.3% from 10.5% last week.
- The Department of Veterans Affairs share of applications retreated to 10.5% from 11.8% the previous week.
- The Department of Agriculture share of total applications inched backward to 0.4% from the prior week’s 0.5%.
- Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.57% from last week’s 3.73%.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) held steady at last week’s 3.72%.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.74% from last week’s 3.84%.
- The average contract interest rate for 15-year fixed-rate mortgages fell to 3.03% from last week’s 3.18%.
- The average contract interest rate for 5/1 ARMs dropped to 3.12% from last week’s 3.21%.