Refinances Take Off as Mortgage Rates Tank
Aug 14th, 2019 @ 1:12 PM by Amber Nelson
In the wake of the plummeting interest rates, U.S. mortgage borrowers rushed to refinance in the latest week, according to the Mortgage Bankers Association.
The MBA’s seasonally adjusted mortgage volume index rose 21.7% this week from the week before and 81% from the year before.
Most of that growth came from an explosion in refinance applications. The MBA refinance index jumped 37% from a week earlier, to a three-year high. The refinance index now stands 196% higher than a year ago.
“The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates. Fears of an escalating trade war, combined with economic and geopolitical concerns, once again pulled U.S. Treasury rates lower,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
The average rate on a 30-year fixed-rate mortgage with a conforming balance dropped to 3.93% with 0.35 point last week, down from 4.01% with 0.37 point the week before. That is the lowest level since November 2016 and a decrease of 88 basis points from the previous year. Over just the past two weeks rates have fallen 15 basis points.
Sinking mortgage rates have made it possible for many who have bought in the past few years to realize monthly savings with refinance loans. The last time rates were lower was back in 2012 and 2013 and a majority of those who could refinance did back then.
Home purchase requests have not been as affected by falling mortgage rates. Applications to buy a home rose 2% this week and 12% from a year ago. Home prices remain high and even the decline in rates has not yet made homeownership affordable for many potential buyers. First-time buyers especially would need rates to fall much farther to compensate for the rise in the lower end of the home price range.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.