A “For Sale” sign in front of a house in Palm Beach, Florida on Wednesday April 7, 2021.
Marco Bello | Bloomberg | Getty Images
A sharp drop in mortgage interest rates sent homeowners and potential buyers back to their mortgage lenders.
Total mortgage application volume jumped 8.6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. This is the first overall increase in weekly requests since the end of February.
The average contract interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 548,250 or less) decreased to 3.20% from 3.27%, with points falling from 0.36 to 0.33 (including set-up costs) for loans with a 20% down payment. . This rate was 25 basis points higher a year ago.
The owners reacted quickly to the potential savings. Home loan refinancing requests jumped 10% for the week, but were still 23% lower than a year ago. The refinancing share of mortgage activity rose to 60% of total applications, compared to 59.2% the previous week.
“Mortgage rates fell to their lowest level in about two months, causing refinancing activity to pick up slightly after six weeks of decline,” said Joel Kan, MBA associate vice president for economic and industry forecasting . “Borrowers have acted on lowering rates on most types of loans, with both conventional and government refinancing requests showing gains.”
Mortgage applications for the purchase of a home are up 6% for the week and 57% more than a year ago. This annual comparison, however, is biased and will last for several more weeks due to the fact that the housing market essentially came to a halt a year ago during the first two months of the pandemic. It then bounced back dramatically early last summer.
“MBA expects the buying market to remain strong, with the labor market recovering and favorable demographics fueling housing demand in the coming months,” Kan said. “The average loan size for requisitions increased after a few weeks of decline as fewer homes available for sale create a competitive buying market that accelerates home price growth.
Rising home prices and the record supply of homes for sale have caused the housing market to slow, even during the historically busy spring season. The hope is that as more Americans are vaccinated, potential sellers will feel better about listing their homes on the market. So far, fewer new listings have hit the market this month than normal.