Low Rates Cause Surge in Mortgage Demand
July 23, 2020
Mortgage applications have been on the rise in the last few weeks, and a housing report from the National Association of REALTORS® on Wednesday finally saw that translate into higher sales—in a big way. NAR reported that existing-home sales surged to a record pace in June, increasing nearly 21% compared to May.
For the ninth consecutive week, mortgage applications posted annual gains, and those increases are widening too. This signals that the rise in sales will likely continue.
Mortgage applications for home purchases rose 2% over the previous week and are 19% higher than a year ago, the Mortgage Bankers Association reported Wednesday. The year-over-year gains last week in applications for home purchases widened over previous weeks, too.
Record low mortgage rates last week may be prompting more home buyers to house hunt. The MBA reports the average contract interest rate for a 30-year, fixed-rate mortgage last week was 3.2%. Freddie Mac reported last week that the national average for the 30-year mortgage rate was 2.98%, an all-time low. Borrowers with stellar credit are snagging rates below 3%, lenders say.
Homeowners are also looking to lower their monthly payments by refinancing. Refinance applications increased 5% last week and are up 122% over the same week a year ago, the MBA reports. Nearly 60% of all outstanding loan balances have at least a half-percentage point incentive to refinance, says Doug Duncan, Fannie Mae’s chief economist.
The higher demand in mortgage applications is translating into sales. Besides an uptick in existing-home sales, homebuilders are also reporting a surge in buyer traffic. Single-family housing starts jumped 17.2% in June, the Commerce Department reports.
“The housing market is hot,” Lawrence Yun, NAR’s chief economist, said in a recent statement. “Home buyers have swiftly moved into the market to take advantage of the unimaginably low mortgage rates.”
However, a shortage of homes for sale, in both the existing- and new-home markets, may limit sales due to rising buyer demand, economists say.Source: “Weekly Mortgage Demand From Homebuyers Jumps Even Higher, Up 19% Annually,” CNBC.com (July 22, 2020)