A “For Sale” sign in front of a house in Palm Beach, Florida, Wednesday, April 7, 2021.
Marco Bello | Bloomberg | Getty Images
A sharp drop in mortgage interest rates has sent homeowners and potential homebuyers to their mortgage lenders.
The total volume of mortgage applications increased by 8.6% last week, compared to the previous week, according to the seasonally adjusted index of the Association of Mortgage Banks. This is the first global increase in weekly applications since the end of February.
The average contractual 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 increasing to 0.36 from 0.33 (including start-up fee) for loans with an advance of 20%. This rate was 25 basis points higher a year ago.
Homeowners have reacted quickly to potential savings. Applications to refinance a home loan increased by 10% for the week, but were 23% lower than a year ago. The share of refinancing of the mortgage activity increased to 60% of total applications, from 59.2% in the previous week.
“Mortgage rates fell to their lowest level in about two months, causing a small resurgence of refinancing activity after six weeks of declines,” said Joel Kan, associate vice president of the MBA for economic and industrial forecasts. “Borrowers have acted to lower rates for most types of loans, both conventional and government financing applications, showing gains.”
Mortgage applications for the purchase of a house increased by 6% per week and were 57% higher than a year ago. However, this annual comparison is sloping and will be for a few more weeks, due to the fact that the real estate market essentially stopped a year ago in the first two months of the pandemic. Then it came back dramatically early last summer.
“The MBA expects the buying market to remain strong, with the job market recovering and the supporting demographics fueling housing demand in the coming months,” Kan said. “The average loan size for purchase applications has increased after a few weeks of declines, as fewer homes available for sale make a competitive buying market that accelerates house price growth.”
Higher house prices and a record low supply of homes for sale have slowed the real estate market, even in the historically crowded spring season. The hope is that as more Americans are vaccinated, potential sellers will feel better when listing their homes on the market. So far, fewer new registrations have appeared on the market this month than they normally would.