Prospective buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters
It hardly sounds like news anymore: Mortgage rates fell to another record low last week, and that revitalized the demand for refinancing. Home buyers, however, took a step back.
The total volume of mortgage applications increased 5.1% last week compared to the previous week, according to the seasonally adjusted index of the Mortgage Bankers Association.
Mortgage demand was fueled by another big drop in mortgage rates. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $ 510,400 decreased to 3.19% from 3.26%. Points, including the starting fee, decreased to 0.33 from 0.35 for loans with a 20% down payment. That rate is 63 basis points lower than the recent high in late March.
Requests to refinance a mortgage loan, which are more sensitive to weekly rate movements, rose 12% during the week and were 107% higher than a year ago. The percentage of refinancing of mortgage activity increased to 64.2% of total requests from 60.1% the previous week. Record low rates prompted Fannie Mae to improve her housing outlook for the second half of this year.
“The continued decline in mortgage rates increased our refinance volume forecast by about $ 100 billion.” said Doug Duncan, chief economist at Fannie Mae. “At the current mortgage rate, we estimate that almost 60% of all outstanding loan balances have at least a half percentage point incentive to refinance.”
Homebuyer demand fell 6% during the week and was 16% stronger than the previous year. However, that annual comparison was half of what it was two weeks ago.
“Buying activity remains relatively strong, despite continued economic uncertainty and high unemployment caused by the ongoing pandemic,” said Joel Kan, associate vice president for economic and industrial forecasting at MBA.
The biggest obstacles to buying a home today are lack of supply and rising prices, especially at the lower end of the market. The nation’s home builders are benefiting from that. Mortgage applications to buy a newly built home increased more than 50% in June annually. However, builders are struggling to keep up with the new demand, especially since they basically closed operations in March and April.
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