As temperatures soar this summer, demand from home buyers is increasing. Add that to an already strong refinance market, and the total volume of mortgage applications increased 4.1% last week from the previous week, according to the Association of Mortgage Bankers.
Helping to fuel demand, mortgage rates hovered near a record low.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $ 510,400 or less increased just barely to 3.20% from 3.19%. Points, including the starting fee, increased to 0.35 from 0.33 for loans with a 20% down payment.
“Mortgage applications increased last week despite mixed results from the various rates recorded in the MBA survey,” said Joel Kan, an economist at the trade group. “The average 30-year fixed-rate mortgage increased slightly to 3.20%, but some creditworthy borrowers are offered rates even below 3%.”
That helped boost the volume of refinancing requests by 5% for the week and 122% compared to the same week a year ago, according to seasonally adjusted index data. The refinancing share of mortgage activity increased to 64.8% of total applications from 64.2% the previous week.
The average in the 30-year fixed rate was 88 basis points higher; 3.19%, where it was two weeks ago, was a record low. Borrowers today are looking for potential savings, given the uncertainty in the economy due to the coronavirus pandemic.
At current low rates, nearly 60% of all outstanding loan balances have an incentive of at least half a percentage point to refinance, according to Fannie Mae chief economist Doug Duncan.
Low rates only add to strong buyer demand. Mortgage applications to buy a home increased 2% during the week and were 19% higher than a year ago. That’s the ninth consecutive week of annual earnings. Last week’s 19% increase was also larger than in previous weeks.
Homebuilders across the country are seeing strong and serious buyer traffic as consumers are now getting used to buying homes they’ve only seen online through virtual tours. A little more inventory is reaching the existing domestic market, but supply is still low compared to a year ago and not enough to meet demand.
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