Mortgage lenders were busy last week, but mostly with current homeowners looking to take advantage of low mortgage rates. Total mortgage application volume increased 1.1% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
Refinance demand drove the volume, rising 5% for the week and a remarkable 207% compared with the same week one year ago. Mortgage rates began falling about a month ago, as fears of the coronavirus hit financial markets. Mortgage rates loosely follow the yield on the 10-year Treasury. Rates are hovering around a three-year low, sparking an unexpected refinance boom.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 3.72% from 3.71%, with points remaining unchanged at 0.28 for loans with a 20% down payment. "The mortgage market continues to be active in early 2020, as applications increased for the third straight week. Rates also rose, but still remained close to their lowest levels since October 2016," said Joel Kan, an MBA economist. "The refinance index climbed to its highest level since June 2013, and refinance loan sizes also increased as a result of an active jumbo lending market.
Mortgage applications to purchase a home fell 6% for the week but were 16% higher compared with the same week one year ago. Buyer demand surged early this year, thanks to fierce competition for a record low supply of homes for sale. Price gains have begun to accelerate, so some started their search early, hoping to get in before the busy spring market. The lack of affordable homes available, however, is clearly keeping some buyers on the sidelines.
"Last month was the strongest January for purchase applications since 2009, which is perhaps a sign that mild weather brought out prospective buyers earlier than normal," added Kan."Given that Chinese equities markets are already indicating the financial market psyche has shifted, it may only be a matter of time before US bond markets follow suit," wrote Matthew Graham, chief operating officer at Mortgage News Daily.
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