With rates on 15-year mortgages hitting a record low, requests to refinance accounted for two-thirds of mortgage applications.

Mortgage applications surged last week, driven by renewed interest in refinancing as rates on 15-year fixed-rate mortgages fell to a record low. But homebuyers were relatively unmoved by lower rates, with demand for purchase loans falling for the second week in a row to the lowest level since May 2020.

The latest Mortgage Bankers Association’s Weekly Mortgage Applications Survey showed requests to refinance accounted for 67.2 percent of all mortgage applications, up from 64.9 percent the previous week.

Joel Kan

“Potential buyers continue to be put off by extremely high home prices and increased competition,” the MBA’s Joel Kan said in a statement, noting that demand for purchase loans has declined on an annual basis for the past three months.

Kan said mortgage rates followed the 10-year Treasury yield down as investors grew concerned about increasing COVID-19 case counts and the downside risks to the economic recovery.

Homeowners could soon get an additional incentive to refinance, with Fannie Mae and Freddie Mac slated to stop collecting a fee on refinances starting Aug. 1. The 50-basis point fee, introduced during the pandemic to protect the mortgage giants from losses, adds $500 in costs for every $100,000 refinanced, or about $1,400 when refinancing a typical $280,000 mortgage.

Sandra Thomson, who runs Fannie and Freddie’s federal regulator, said the Federal Housing Finance Agency is lifting the fee ahead of schedule because COVID relief programs have proven effective, and that the agency expects lenders will pass cost savings along to borrowers.

For the week ending July 23, the MBA reported average rates for the following loan types:

  • For 30-year fixed-rate conforming mortgages (loan balances of $548,250 or less), rates decreased to 3.01 percent from 3.11 percent. With points also decreasing to 0.34 from 0.43 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $548,250), rates decreased to 3.11 percent from 3.13 percent. With points decreasing to 0.27 from 0.32, the effective rate also decreased from last week.
  • For 30-year fixed-rate FHA mortgages, rates decreased to 3.03 percent from 3.08 percent. Although points increased to 0.35 from 0.31, the effective also rate decreased.
  • Rates for 15-year fixed-rate mortgages — popular with homeowners refinancing — decreased to 2.36 percent from 2.46 percent. With points unchanged at 0.30, the effective rate also decreased from last week.
  • For 5/1 adjustable-rate mortgages (ARMs), rates increased to 2.81 percent from 2.74 percent. With points also increasing to 0.23 from 0.19, the effective rate increased from last week.

Email Matt Carter

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