A “For Sale” sign outside a home in Palm Beach, Florida on Wednesday, April 7, 2021.
Marco Bello | Bloomberg | Getty Images
A sharp drop in mortgage rates sent homeowners and potential buyers to their mortgage lenders.
According to the seasonally adjusted index of the Mortgage Bankers Association, the total volume of mortgage applications rose 8.6% in the past week compared to the previous week. This is the first increase in weekly requests since late February.
The average contract rate for 30 year fixed rate mortgages with compliant loan balances ($ 548,250 or less) decreased from 3.27% to 3.20%, with points for loans with a 20% down payment of 0.33 (including origination fee) rose to 0.36. This rate was 25 basis points higher a year ago.
Homeowners were quick to respond to the potential savings. Home loan refinance requests rose 10% over the week but were still 23% lower than a year ago. The refinancing share of mortgage activity rose from 59.2% in the previous week to 60% of total applications.
“Mortgage rates fell to their lowest level in around two months, which led to a slight recovery in refinancing activity after a six-week decline,” said Joel Kan, vice president of economic and industrial forecasting for MBA. “Borrowers reacted to the rate cut on most types of loans, with both conventional and government refinancing requests making gains.”
Home purchase mortgage applications rose 6% over the week and 57% higher than a year ago. That yearly comparison is skewed, however, and will take a few more weeks as the real estate market essentially stalled in the first two months of the pandemic a year ago. It then recovered dramatically at the beginning of last summer.
“MBA expects the shopping market to remain strong. The recovering labor market and supportive demographics are fueling demand for residential property in the coming months,” said Kan. “The average loan size for purchase requests rose after a few weeks of decline as fewer homes for sale result in a competitive buying market that accelerates property price growth.”
Higher property prices and the record low supply of properties for sale have meant that the property market has slowed down even in the historically busy spring season. The hope is that if more Americans are vaccinated, potential sellers will feel better when they put their homes on the market. So far this month there have been fewer new offers than usual.