Last week, mortgage rates dropped to their lowest level ever in the history of the Mortgage Bankers Association’s (MBA) 30-year-old weekly survey.
The average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances of $510,400 or less dropped to 3.45 percent from 3.49 percent, spurring a rush to refinance. Total mortgage application volume increased by 7.3 percent last week from the previous week on a seasonally adjusted basis. The refinance index increased by 10 percent from the previous week and by 192 percent year-over-year, causing the refinance share of mortgage activity to increase to 76.2 percent of total applications, up from 74.2 percent the week before.
“The decline in rates — despite Treasury yields rising — is a sign that the mortgage-backed securities (MBS) market is stabilizing and lenders are successfully working through their lending pipelines,” Joel Kan, associate vice president of economic and industry forecasting at MBA, said in a statement. “Refinance activity has experienced a volatile four-week period, but did increase 10 percent last week. Refinancing will continue to be beneficial for the many borrowers able to lower their monthly payments during this time of economic distress.”
Although low rates caused a surge in refinances, they did not have the same effect on home purchases. The seasonally adjusted purchase index decreased 2 percent from the previous week, and the unadjusted purchase index decreased 1 percent from the week before, and dropped by 35 percent year-over-year.
“Home purchases seem to be holding up surprisingly well,” Holden Lewis, home and mortgage expert at NerdWallet, told Inman in an email. “Although purchase applications are down 35 percent compared to early March, you get the feeling that it could have been worse. Home buying season traditionally ramps up rapidly this time of year. Instead, we’re seeing a large, but not yet catastrophic, decline.”
MBA’s survey also showed the sharp decline in non-seasonally adjusted purchase applications in the coronavirus pandemic’s wake in Washington, California and New York — by about 50 percent across the board — from one year ago.
Only the Federal Housing Administration (FHA) share of total applications changed from the prior week with a decrease to 9.5 percent from 10.6 percent the previous week. The U.S. Department of Agriculture (USDA) and the U.S. Department of Veterans Affairs (VA) share of total applications, however, remained the same as the week prior at 0.4 percent of total applications and 14.3 percent of total applications, respectively.
The average contract interest rate for 30-year, fixed-rate mortgages with jumbo loan balances (balances greater than $510,400) declined to 3.80 percent from 3.87 percent the week prior. However, the average contract interest rate for 15-year fixed-rate mortgages stayed the same at 3.04 percent.