According to a new report, as investors’ confidence in an economic rebound has waned, mortgage rates collapsed, resulting in more applications and increased refinancing. Here’s the latest.
Mortgage applications grew by 6.8% (on a seasonally adjusted basis) over the previous week during the week ending August 7, according to data from the Mortgage Bankers Association's [1] (MBA) Weekly Mortgage Applications Survey.
Meanwhile, the Index ballooned 6% on an unadjusted basis compared with the previous week, while there was a 9% uptick in the Refinance Index from the week before. From the same week a year ago, the Index was higher by 47%. There was a 2% jump from a week earlier in the seasonally adjusted Purchase Index, with a 1% rise in in the unadjusted Purchase Index from the previous week. From the same week a year ago, it was higher by 22%.
As investors’ confidence in an economic rebound waned following a rise in coronavirus cases, mortgage rates last week collapsed across the board, said Joel Kan, MBA's AVP of Economic and Industry Forecasting.
“Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows,” he continued, while refinance activity responded to these lower rates, with the refinance share reaching almost 66% of all applications—its highest level since May. At the same time, the refinance index jumped 9%, reaching its highest level since April.
Contrasted with the same week a year ago, home purchase activity sustained its strong run with an increase of 2% increase throughout the week. It climbed approximately 22% compared to the same week a year earlier, he said.
While this remained upbeat news for the purchase market, the slow pace of the job market’s improvement and a tight housing inventory continued to pose a concern for coming months—even in light of continued support stemming from low mortgage rates, remarked Kan.
There was a 65.7% spike of total applications from 63.9% the week before in the refinance share of mortgage activity and a 2.7% drop off in the adjusted rate mortgage share of activity of total applications.
The FHA share of total applications bounced to 10.4% from 9.6% the prior week. Meanwhile, the VA share of total applications rose to 11.4%, compared to the week before, when it stood at 11.2%. Holding steady from the week before was the USDA share of total applications at 0.6%.
The momentum in mortgage applications continued its roll. For the week ending July 3, there was a 2.2% surge in mortgage applications from the week before, based on MBA data [2].
The Index sagged 8% on an adjusted basis while the Refinance Index went in the other direction. It rose 0.4% from the previous week.
In the shadow of heightened trepidation spawned by COVID-19, mortgage rates toppled to another record low, offsetting the influences from a week of mostly optimistic economic data, such as June factory orders and payroll employment, Kan said.
There was a drop of 3.25% in the 30-year fixed-rate. Dating back to late March, it’s off 53 basis points.