Mortgage rates held at a record low last week, but the demand for refinancing fell back anyway.
That, in addition to a brief respite from the surprisingly strong demand from home buyers, caused the total volume of mortgage applications to drop 8.7% on a seasonally-adjusted basis from the previous week, according to the Association of Mortgage Bankers.
Mortgage applications for home buyers have been on the rise for five consecutive weeks, thanks to pent-up demand from March and April and the coronavirus-induced desire by more consumers to find more space and escape urban apartments. Mortgage purchase volume fell 3% during the week, but was a remarkable 18% higher than a year ago.
“One factor that could hinder growth in the coming months is that the release of pent-up demand earlier this spring is colliding with the poor supply of new and existing homes on the market,” said Joel Kan, MBA economist. “An additional home inventory is needed to give buyers more options and to prevent home prices from rising too fast.”
Requests to refinance a home loan fell 12% during the week, but were 76% higher than the same week in 2019. Lenders may not offer the best refinance rates, simply to keep up with the high volume they now see from home buyers. Also, the difference between where rates were a year ago and where they are now is narrowing.
“Despite last week’s decline, MBA still anticipates refinance origins to rise to $ 1.35 trillion in 2020, the highest level since 2012,” Kan said.
The refinancing share of mortgage activity decreased to 61.3% of total requests from 63.2% the previous week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $ 510,400 or less was unchanged at 3.30%. Points including the starting fee increased to 0.32 from 0.29 for loans with a 20% down payment.