The demand for mortgage loans for home buyers ends in 2020 on a lower note

A real estate agent is preparing a house for viewing in Venice, California.

Anne Cusack | Los Angeles Times | Getty Images

What was expected to be a trivial year in the mortgage market was anything else: a sharp drop in housing demand at the start of the pandemic took a turn and continued to rise, and the average rate of the popular fixed mortgage for 30 years set no less than 15 record lows.

Demand for mortgages ended the year significantly higher than 2019, but seems to be cooling a bit for the holidays. The total volume of mortgage applications increased by 0.8% last week, compared to the previous week, according to the seasonally adjusted index of the Association of Mortgage Banks.

Mortgage rates ended just 1 basis point higher than the most recent minimum record. The average contractual interest rate for 30-year fixed-rate mortgages with compliant loan balances ($ 510,400 or less) increased to 2.86% from 2.85%, with points remaining unchanged at 0.33 (including the initiation fee) for loans with an advance of 20%. This is a completely lower percentage point than a year ago.

Low tariffs continue to fuel the volume of refinancing, which increased by 4% per week and was 124% higher than a year ago. The share of refinancing of the mortgage activity increased to 74.8% of total applications from 72.7% in the previous week.

“Last week’s increase in refinancing requests was driven by FHA and VA activity, while conventional refinancing declined slightly,” said Joel Kan, associate vice president of MBA for economic and industrial forecasts.

Mortgage applications for the purchase of a house fell by 5% for the week, but were 26% higher than a year ago. This is the second drop in three weeks, as potential buyers face a severe shortage of housing and a rapid rise in prices. The supply of houses for sale at the end of November fell to a record level, according to a report on Tuesday by the National Association of Realtors.

The average loan balance for purchase requests last week set another record at $ 376,800. This is due to the fact that most of the sales activity is in the upper part of the market, where the supply is more abundant. The low level consists of the weakest offer and the strongest price gains, affecting accessibility.

“There are still signs of relative strength in the real estate market by the end of 2020. However, housing accessibility will be worth monitoring next year,” Kan said.