Weekly mortgage applications jumped to their highest level in more than a month, reflecting summer break adjustments after the Memorial Day holiday. Such a large jump reflects a significant spike in both refinancing and purchasing activity. Most importantly, it hints at a new trend away from homeownership in our housing market.
According to the Mortgage Bankers Association (MBA), overall mortgage application volume jumped by 12.5% compared to the previous week. This is almost double the rate from just last week. This increase occurred, even as applications for refinancing rose by a significant 16%. And annualized, refinancing applications were up 28% from the same week last year. This counterintuitive jump is the latest indicator of a rising wave of homeowners who are desperately willing to revise their mortgage obligations.
Joel Kan is the MBA’s vice president and deputy chief economist. He provided further analysis on these recent developments, specifically highlighting how today’s market forces are making things worse.
“Coming out of the Memorial Day holiday, mortgage applications increased to the highest level in over a month,” – Joel Kan
The average contract interest rate for 30-year fixed-rate mortgages has now risen to 6.93%. This is true even of conforming loan balances, which are defined as $806,500 or less. Though there was some movement up and down in each day of trading last week, interest rates didn’t go anywhere. The mortgage point value decreased from 0.66 to 0.64, reflecting the origination fee included on loans with a 20% down payment.
Applications for home purchase loans jumped 10% this week. They are currently 20% higher than this time last year. This increase is indicative that would-be buyers are taking advantage of the loosening of housing stock in certain markets. Kan remarked on this trend, stating:
“Despite ongoing uncertainty surrounding the economy, homebuyers seem to be taking advantage of loosening housing inventory in certain markets,” – Joel Kan
The effective mortgage interest rate is now just 9 basis points lower than this week last year. This small adjustment is indicative of the larger resiliency in today’s market. With the market conditions continuing to evolve, next monthly data on inflation will release on Wednesday. This data is bound to make waves in mortgage rates and mortgage applications trends to come.
Prolonged trade negotiations with China are only exacerbating the uncertainty in the housing market. At the same time, supply has increased by more than 31% from the same time last year, per Realtor.com.