Smart Borrower Blog

Refinance Applications Plummet to 17-Year Low


May 24th, 2018 @ 6:54 PM by Amber Nelson


A year of steadily rising mortgage interest rates has kept many borrowers from refinancing, according to the Mortgage Bankers Association (MBA), with applications for refinance loans falling to the lowest in over 17 years.

During its latest weekly survey, the MBA’ Market Composite Index, a measure of total refinance and home purchase application volume, declined 2.6% led by a 4 percent decrease in refinance requests. Refinance volume is down 27% on a yearly basis.

“Treasury rates increased 10 basis points last week, driven largely by favorable news on retail sales data and industrial production in April, which more than offset data showing still-slow new residential construction,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release. “As a result of rising rates, refinance applications continued to decrease, with the refinance index hitting its lowest level since December 2000.”

Where refinance applications made up more than 50% of all home loan requests during the past several years, they now account for just 35.7% of all mortgage applications, down from 35.9% last week.

The average rate on a 30-year conforming fixed rate mortgage rose to 4.86% in the past week, its highest point in over 7 years, up from 4.77% the week before.

As interest rates have continued to climb, pricing buyers and borrowers out of traditional loans, other mortgages have gained in popularity. FHA loan applications made up 10.3 % of the total, unchanged from last week. VA mortgages accounted for 9.8%, down from 10.3% a week earlier and the USDA loan share was unchanged at 0.8%.

And even though interest rates on adjustable rate mortgages have risen to record highs, the ARM share of mortgage applications has grown to 6.8% of all requests. During the latest week, the average rate on a 5/1 ARM rose to 4.12%, up from 4.09% the previous week. ARM loans are more attractive these days as they offer extra low interest rates for the first several years before adjusting to a floating rate.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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