Lower Rates Buoy Refis, Not New Mortgages

Lower mortgage rates are prompting homeowners to refinance, but applications for home purchases aren’t rising. The Mortgage Bankers Association reported on Wednesday that total mortgage applications—including for refinances and home purchases—rose 4.4 percent week-over-week on a seasonally adjusted basis for the week ending May 19.

The 30-year fixed-rate mortgage averaged 4.17 percent last week, down from 4.23 percent the week prior, MBA reports. But overall mortgage rates dropped to the lowest level since last November, helping to push refinancing applications up 11 percent for the week. Refinance volume still remains 30 percent below the same week one year ago, when rates were even lower.

“Homeowners took advantage of the six basis-point drop in rates,” says Lynn Fisher, MBA’s vice president of research. “Jumbo rates fell even more, sending the average refinance loan size up 5 percent, as borrowers with larger loans, who are typically more sensitive to rate changes, moved to refinance.”

Meanwhile, mortgage applications for home purchases dropped 1 percent week-over-week, and purchase applications are now just 3 percent higher than the same week a year ago. “Despite favorable rates and labor market trends, the purchase market is struggling to accelerate due to low inventories of homes for sale and rising home prices,” Fisher says.

Source: “Big Drop in Mortgage Rates Juices Refinances, But Doesn’t Seduce Buyers,” CNBC (May 24, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”