Weekly mortgage applications increase by 30%
It was a very strong start to 2020 in the area of mortgages for new home loans and refinancings.
Total mortgage application volume jumped 30.2% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Refinancing led the surge, thanks to lower mortgage rates. These requests jumped 43% for the week and were 109% higher than a year ago. The refinancing share of mortgage activity rose to 62.9% of total applications, from 58.9% the previous week.
The average contractual interest rate for 30-year fixed rate mortgages with compliant loan balances ($ 510,400 or less) fell to its lowest level since September, 3.87%, from 3.91 %, with points decreasing to 0.32 from 0.34 (including origination fees) for loans with a 20% down payment. The rate was 87 basis points higher the same week a year ago.
“Refinances have increased for both conventional and government loans, as lower rates give borrowers more incentive to act,” said Joel Kan, MBA economist. “It remains to be seen whether this strong refinancing pace is sustainable, but even with robust activity over the past two weeks, the level is still lower than last fall.”
Homebuyers were also rushing, pushing the volume of purchase requests up 16% for the week and 8% from a year ago. Mortgage buying activity is at its highest level since October 2009. Demand is so high that real estate agents have offered open houses on new properties on the first weekend of the new year. Usually they wait until February.
“Home buyers were active the first week of the year. Low rates and a strong job market continue to encourage potential buyers to enter the market,” Kan said.
Unfortunately, buyers’ demand is met with an almost record supply. Price increases have accelerated again and if supply does not improve significantly, some of the tightest markets will quickly overheat, leaving less fortunate buyers in the cold.