Refinances Slow As Rates Remain Low
Mar 2nd, 2016 @ 9:57 PM by Amber Nelson
The MBA measures the volume of refinance applications every week with its Refinance Index, which fell 7 percent on a seasonally adjusted basis during the week ended February 26, 2016, falling to its lowest level since January of this year. Fewer Americans applied for home-purchase mortgages as well, with the seasonally adjusted Purchase Index slipping 1 percent the previous week. Taken together, total mortgage applications dropped 4.8 percent.
Refinance loan requests made up 58.6 percent of all applications, down from 61.0 percent the week before and the lowest share since the beginning of 2016.
“Despite a slight drop in rates, refinance applications decreased overall. Applications for both conventional and government refinance loans decreased, as the supply of borrowers who could benefit from rates at this level begins to diminish,” said Joel Kan, MBA’s associate vice president for forecasting and industry surveys.
Long-term mortgage interest rates have made a steady descent since the first week of this year. The average rate on a 30-year fixed-rate conventional mortgage declined to 3.62 percent, excluding fees, according to Freddie Mac, during the week ended February 25, down from 3.65 percent the previous week and the lowest level of the year. Rates began 2016 at an average of 3.97 percent.
And as those rates have dropped week over week, homeowners have seen less reason to rush out and refinance. There will likely not be another significant increase in refinance activity until rates actually start to rise again.
The MBA also reported that FHA mortgage applications made up 12.0 percent of all requests during the latest week, unchanged from the week before, while VA loan requests fell to 12.1 percent of applications from 13.0 percent.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.