A brief drop in mortgage interest rates sent some borrowers rushing to their lenders to see if they could get any savings. That sent total mortgage application volume up 2.1% last week from the previous week, according to the Mortgage Bankers Association.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.11% from 3.18%, with points decreasing to 0.32 from 0.34 (including the origination fee) for loans with a 20% down payment. That is the lowest rate since February, and it is 32 basis points lower than one year ago.
As a result, applications to refinance a home loan, which have been weak lately, increased 3% from the previous week but were still 12% lower than a year ago, according to the MBA’s seasonally adjusted index. The refinance share of mortgage activity was essentially unchanged.
“The decline in rates helped the refinance index reach its highest level in eight weeks, driven by a 4 percent increase in conventional refinances,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Additionally, refinance loan balances increased for the fourth straight week, an indication that higher-balance borrowers acted to take quick advantage of lower rates.”
Mortgage demand from homebuyers rose just 1% for the week and was 13% higher than a year ago. The annual comparison has been skewed for several weeks, since the housing market ground to a halt at the start of the pandemic in March 2020 and then came back strongly by June. It will be more important to watch that comparison over the coming weeks to see how it adjusts.
“Most markets this spring continue to see robust demand, but activity continues to be constrained by insufficient inventory levels, as well as homebuilder challenges related to the ongoing shortages and price increases for building materials,” Kan added.
Mortgage rates are already popping back up this week, especially Tuesday, because of a surge in the supply of bonds being offered, especially Treasury and corporate bonds.
“While neither of these are the same bonds that most directly influence mortgage rates, they are correlated and interdependent enough that mortgage rates ultimately feel the ill effects of increased supply,” said Matthew Graham, chief operating officer at Mortgage News Daily.