Refinance applications sputter despite low rates

Refinance applications sputter despite low rates
Mortgage applications dipped 2.4% for the week ending Aug. 27, with a notable drop in refinance applications, according to the latest report from the Mortgage Bankers Association.

On an unadjusted basis, the weekly mortgage application survey by the trade organization decreased 3% compared to the prior week. The refinance index fell 4% but was still higher than it was a year ago. The seasonally adjusted purchase index dropped 2% compared to the previous week and was 16% lower than it was a year ago, largely due to soaring prices and paltry inventory.

Unlike prior weeks, there was little movement of mortgage rates or Treasury spreads. The 30-year-fixed-rate mortgage stayed at 3.03%.

“Despite low rates, refinance applications declined, with some borrowers still waiting for rates to drop even lower. Recent uncertainty around the economy and pandemic have kept rates low over the past month, which is why the refinance index has oscillated around these levels,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Even with a slight increase, purchase activity hit its highest level since early July, as applications for conventional and government loans increased.”

Kan noted that home purchase activity is disproportionately concentrated in the higher price tiers of the housing market. The average purchase loan size hit $396,500 for the week ending Aug. 27, the highest average in five weeks.

“According to FHFA, June’s year- over-year increase in home prices was 18.8 percent, while the second quarter saw a 17.4 percent increase overall,” Kan said in a statement. “Both measures set new records, as housing demand continued to outpace the inventory of homes for sale.”

The refinance share of mortgage activity fell to 66.8% from 67.3% the week prior. According to the MBA, the adjustable-rate mortgage rose slightly to 3.2% of total applications. The FHA share of total mortgage applications rose to 11.2% from 11.0% the prior week.

The average contract interest rate for the 30-year-fixed-rate mortgage with a jumbo balance (north of $548,250) remained unchanged at 3.13%, according to the MBA.
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