Refinancing activity was primarily responsible for the boost in mortgage volumes, indicating that homeowners are taking advantage of historically low interest rates.
Total mortgage application volume rose by 0.4 percent on a seasonally adjusted basis in the week ending June 12, 2020. Refinancing activity increased by 1 percent from the previous week and purchases increased by 0.2 percent.
The MBA's index measuring refinancing applications surged to its highest level in three months with a 11.3 percent weekly gain. The seasonally adjusted Purchase Index increased by 0.2 percent, while the Refinance Index rose by 1 percent from the prior week.
The 30-year fixed mortgage rate decreased to 3.18 percent from 3.20 percent last week. This is the lowest rate since November 2016. Additionally, 15-year fixed rates declined to 2.62 percent from 2.64 percent the previous week.
The share of refinances rose to 60.7 percent of total applications, up from 58.0 percent the prior week. On the other hand, the adjustable-rate mortgage (ARM) share of applications decreased from 7.7 percent to 6.7 percent, despite a 0.1 percent decrease in ARM loan applications.
The volume of mortgage applications is an important indicator of the strength of the housing market. Although the current numbers are still far from pre-pandemic levels, the increase in refinancing activity suggests that homeowners are looking to take advantage of the historically low interest rates currently available. However, the majority of those applying for mortgages are looking to refinance rather than purchase a home, indicating that there may still be a hesitancy to enter the housing market in the near future.
Analysis:
The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey showed that mortgage volumes were up for the second consecutive week, likely due to increased refinancing activity. This indicates that homeowners are taking advantage of low interest rates to refinance their home loans and potentially save money on their monthly payments. The 30-year fixed mortgage rate decreased to 3.18 percent from 3.20 percent last week, which is the lowest rate since November 2016. Additionally, 15-year fixed rates declined to 2.62 percent from 2.64 percent the previous week.
The share of refinances jumped to 60.7 percent of total applications, up from 58.0 percent the prior week. This suggests that more homeowners are looking to take advantage of lower rates to save money. On the other hand, the adjustable-rate mortgage (ARM) share of applications decreased from 7.7 percent to 6.7 percent, indicating that buyers are not yet entering the housing market in droves.
Overall, while the current numbers are still far from pre-pandemic levels, the increase in refinancing activity does suggest that homeowners are looking to take advantage of historically low interest rates. This could be beneficial in the short-term, as homeowners can reduce their monthly expenses by refinancing their loans. However, the majority of those applying for mortgages are looking to refinance rather than purchase a home, suggesting that there may still be a hesitancy to enter the housing market in the near future.
This article was contributed on Dec 02, 2023
