With mortgage rates falling last week to their lowest level since April, it wasn’t a surprise to see a big jump in refinance applications. The average contract interest rate for 30-year fixed-rate mortgages decreased from 6.88% to 6.79%. This only applies to conforming loan balances of $806,500 or smaller. This sharp drop in rates has, in turn, made refinancing more appealing to a significant share of homeowners.
At last, interest rates have fallen, carrying with them a modest reduction in points offered for such mortgages. They dropped from 0.63 to 0.62, including the origination fee, for 20% downpayment loans. Mortgage rates fell 24 basis points from this time last year. This drop is boosting would-be borrowers to look into refinancing.
Last week, applications to refinance a home loan jumped 7%. This represents a notable uptick from last week at the same time, according to the Mortgage Bankers Association’s (MBA) weekly, seasonally adjusted index. Demand for mortgage applications was strong, up 40% from the same week one year earlier. Refinance applications were the only category to see an increase in the average loan size. It rose to $313,700 — a new high — well above the six-week average before this of under $300,000.
Joel Kan, the Mortgage Bankers Association’s vice president and deputy chief economist, explained that the decline in rates has stimulated demand.
“This decline prompted an increase in refinance applications, driven by a 10 percent increase in conventional applications and a 22 percent increase in VA refinance applications,” – Joel Kan
As much as it helped with the refinance boom, applications for buying a new home only rose 0.1% on the week. These applications were still 16% higher than the same week last year. Kan pointed to overall uncertainty still keeping homebuyers on the sidelines of the market.
Matthew Graham, chief operating officer at Mortgage News Daily, offered more context. For the last two days, mortgage rates have declined again from that horrible peak. He stated,
“Rates typically move higher if job openings are higher than expected, all else equal,” – Matthew Graham
Recent unexpected data on job openings saw another jump upwards, resulting in Tuesday’s announcement translating into relatively flat rates. Unfortunately, homebuyers and people seeking to refinance should prepare themselves for more whiplash-inducing volatility. The government will issue its highly-anticipated monthly employment report this Thursday. This report will probably have a strong impact on the direction of mortgage rates going forward.