Lower Mortgage Rates Propel Surge in Loan Applications
Borrowers came in swarms last week to take advantage of another massive drop in mortgage rates. Mortgage application activity, which includes refinances and home purchases, surged 55.4% last week compared to the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Volume was 192% higher year over year.
The bulk of the increase came from homeowners refinancing their mortgages into lower rates. Applications for refinances jumped 79% for the week and are 479% higher than a year ago, the MBA reports. That marks the highest level of refinancing since April 2009.
The MBA reports the average interest rate for a 30-year fixed-rate mortgage was 3.47% last week, a rate that is 117 basis points lower than a year ago. Freddie Mac’s weekly mortgage market indicator had rates even lower and at an all-time low last week, averaging 3.29%.
“Taking into account the current economic situation and how much rates have fallen, the MBA is nearly doubling its 2020 refinance originations forecast to $1.2 trillion, a 37% increase from 2019 and the strongest refinance volume since 2012,” says Joel Kan, an MBA economist. “As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This in turn will support borrowers looking to refinance or purchase a home this spring.”
Applications to purchase a home rose at a more subdued pace than refinancing applications, up 6% for the week. Applications are up 12% annually, the MBA reports.