Real Estate

Dip In Rates Boosts Demand For Mortgages

Last week’s dip in mortgage rates boosted applications for purchase loans and revived interest in refinancing, according to a weekly survey of lenders by the Mortgage Bankers Association.

Last week’s dip in mortgage rates boosted applications for purchase loans and revived interest in refinancing, according to a weekly survey of lenders by the Mortgage Bankers Association.

The MBA’s weekly mortgage applications survey showed demand for purchase loans grew by a seasonally adjusted 8 percent from the week before but was down 29 percent from a year ago. Requests for refinancing were up 20 percent week-over-week but down 29 percent from a year ago.

The big drop in applications for both types of loans compared to a year ago was due to the Fourth of July holiday, said MBA forecaster Joel Kan.

Joel Kan

“We continue to see ebbs and flows as housing demand remains strong but for-sale inventory remains low,” Kan said in a statement. “However, lower rates may be helping some home buyers close on their purchases, especially first-time home buyers. The year-over-year comparisons were down significantly for both purchase and refinance applications, as they were relative to a non-holiday week in 2020.”

Requests to refinance accounted for 64.1 percent of all mortgage applications, up from 61.6 percent the previous week. In the long run, however, mortgage rates are expected to rise, and refinancings are projected to plummet by 49 percent next year. That will make attracting homebuyers all the more critical for mortgage lenders.

The MBA survey showed average rates for the following types of loans for the week ending July 9:

  • For 30-year fixed-rate conforming mortgages (loan balances of $548,250 or less), rates averaged 3.09 percent, down from 3.15 percent the week before. With points decreasing to 0.37 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased from last week.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $548,250) averaged 3.16 percent, down from 3.2 percent the week before. With points decreasing to 0.27 from 0.28, the effective rate also decreased from last week.
  • For 30-year fixed-rate FHA mortgages, rates averaged 3.15 percent, down from 3.17 percent the week before. With points decreasing to 0.29 from 0.32, the effective rate decreased from last week.
  • Rates for 15-year fixed-rate mortgages averaged 2.48 percent, down from 2.52 percent the week before. Although points increased to 0.32 from 0.23, the effective rate still decreased from last week.
  • For 5/1 adjustable-rate mortgage (ARM) loans, rates averaged 3.02 percent, up from 2.94 percent the week before. Although points decreased to 0.32 from 0.34, the effective rate also increased from last week.

The latest Originations Market Monitor report from mortgage and property data aggregator Black Knight shows that spiralling home prices are boosting demand for jumbo mortgages, which traditionally carry higher interest rates than conventional loans eligible for purchase by Fannie Mae and Freddie Mac.

Email Matt Carter

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