After 5 Years, Home Purchase Mortgage Applications Finally Outpace Refinance Applications
May 7th, 2014 @ 7:47 PM by Amber Nelson
Since the middle of the Great Recession, when mortgage rates fell dramatically and home sales tanked, Americans have applied for more refinance loans each week than for home-buying mortgages. Finally after five straight years, that streak has been broken.
The Mortgage Bankers Association report that during the past week (the week ended May 2, 2014), refinance applications made up 49 percent of all mortgage applications, down from 50 percent the week before.
“It is official: we are in a majority purchase market for the first time since 2009,” said Mike Fratantoni, MBA’s Chief economist in a statement. “A sizeable increase in purchase applications last week likely reflected the impact of somewhat lower mortgage rates as well as continued growth in the job market, as confirmed by Friday’s employment report from the [Bureau of Labor Statistics].”
The Labor Department reported that the unemployment rate fell in April to 6.3 percent from March’s 6.7 percent with the addition of 288,000 non-farm jobs to the economy.
Still, even as home purchase loans overtook refinance loans in popularity, the total volume of applications is well behind May 2013 figures. “Despite the strong increase in the purchase market last week, volume continues to run 16 percent behind last year’s pace,” said Fratanoni.
The MBA’s Market Composite Index – a measure of total loan application volume – rose 5.3 percent in the latest week, with the Refinance Index growing 2 percent and the Purchase Index climbing 9 percent. The Purchase Index is now at a three-month high.
Low mortgage interest rates helped push all the indices higher. The average rate on a 30-year conforming fixed rate mortgage dropped to 4.43 percent, excluding fees, last week from 4.49 percent the week before. With rates likely to keep rising slowly throughout the year, the share of home purchase applications will probably remain higher than the refinance requests. With rates having been at rock bottom lows for the past several years, most of those who could refinance already have.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.