Last week, applications to refinance existing home mortgages were down 5%. That drop is the smallest level in a month according to the Mortgage Bankers Association. Even with the drop, refinance applications are still 63% higher than the same week last year. At the same time, mortgage applications to buy homes increased by 1%, corresponding to the strongest demand in almost two months. The average rate on a 30-year fixed mortgage has edged down to 6.71% from 6.72%. This increase occurs against a backdrop of severe headwinds this spring.
In fact, total volume of mortgage applications dropped 2% last week, mostly due to a drop in refinance demand. Joel Kan, an economist with the Mortgage Bankers Association, pointed out one major theme. He says the homebuyer demographic is just starting to come back into the market in force. He noted that the annual comparison of mortgage applications appears substantial due to the overall low volume experienced last year.
"Last week's purchase activity was driven primarily by a 6 percent increase in FHA applications, as the combination of loosening housing inventory and slowly declining mortgage rates have presented this segment of buyers with more opportunities," – Joel Kan
Even with the recent drop in mortgage rates, refinancing is still out of reach for most homeowners. When mortgage rates were at their record lows three years ago, many homeowners are not in a position to benefit from refinancing. Those who purchased homes within the last two years at higher rates are now leveraging the current lower rates.
Compared to this same time last year, when mortgage rates were 22 basis points higher. This increase drove a 7% increase in home purchase applications from this week last year. These lower interest rates have been a boon for worried would-be buyers, but obstacles remain in the ongoing inability of today’s market to maintain healthy, sustainable growth.