A ‘For Sale’ sign for a home in Palm Beach, Florida, on Wednesday, April 7, 2021.
Marco Bello | Bloomberg | Getty Images
A sharp drop in mortgage interest rates sent homeowners and potential home buyers to their mortgage lenders.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total number of mortgage applications has increased by 8.6% last week compared to the week before. That is the first general increase in the number of weekly applications since the end of February.
The average contract rate for 30-year fixed-rate mortgages and conforming loan balances ($ 548,250 or less) decreased from 3.27% to 3.20%, increasing points to 0.36 from 0.33 (including origination fees) for loans with a deposit of 20%. That rate was 25 basis points higher a year ago.
Homeowners were quick to respond to the potential savings. Refinancing applications for a home loan were up 10% during the week, but were still 23% lower than a year ago. The refinancing share of the mortgage business rose to 60% of total applications from 59.2% last week.
“Mortgage rates fell to their lowest level in about two months, leading to a small rebound in refinancing activity after six weeks of declines,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Borrowers responded to the cut in rates for most types of loans, with both conventional refinancing applications and government applications showing gains.”
Mortgage applications to buy a home were up 6% for the week and were up 57% from a year ago. However, that annual comparison is skewed and will take several more weeks due to the fact that the housing market basically stalled a year ago during the first two months of the pandemic. It then returned dramatically at the beginning of last summer.
“MBA expects the owner-occupied market to remain strong, with the recovering labor market and supportive demographics fueling housing demand in the coming months,” Kan said. “Average loan sizes for purchase requests increased after a few weeks of decline as fewer homes for sale provide a competitive buying market that accelerates the rise in home prices.”
Due to increased house prices and the unprecedented low supply of owner-occupied homes, the housing market has even slowed down in the historically busy spring season. The hope is that as more Americans are vaccinated, potential sellers will feel better about putting their homes on the market. So far, fewer new listings have hit the market this month than usual.