Refinancing Surges as Mortgage Rates Hit New Lows
Mortgage rates dipped to their lowest point since April last week, sparking a wave of refinancing activity among current homeowners looking to capitalize on savings. According to the Mortgage Bankers Association (MBA), refinance applications rose 7 percent from the previous week and surged 40 percent compared to the same period a year ago.
The average interest rate for a 30-year fixed mortgage with conforming loan balances ($806,500 or less) dropped to 6.79 percent from 6.88 percent. Points also edged down slightly to 0.62 for borrowers putting down 20 percent. Though that rate remains historically high, it is 24 basis points lower than this time last year.
“This decline prompted an increase in refinance applications, driven by a 10 percent increase in conventional applications and a 22 percent increase in VA refinance applications,” said Joel Kan, MBA’s vice president and deputy chief economist. He also noted that borrowers with larger loans were especially responsive to the rate change, as reflected in the average refinance loan size jumping to $313,700 after holding below $300,000 for the previous six weeks.
Meanwhile, the drop in rates did little to ignite fresh activity among prospective homebuyers. Mortgage applications to purchase a home rose just 0.1 percent for the week and remain 16 percent higher year-over-year. Kan attributed the stagnation in buyer demand to ongoing market uncertainty.
Mortgage rates have continued to slide into the current week, according to a separate survey by Mortgage News Daily, though they held steady Tuesday following the release of stronger-than-expected job openings data. “Rates typically move higher if job openings are higher than expected, all else equal,” noted Matthew Graham, the site’s chief operating officer. However, he warned that any recent volatility may pale in comparison to potential movement following Thursday’s monthly employment report from the federal government.
As the market awaits that key economic data, homeowners hoping to refinance remain alert to opportunities, while prospective buyers continue to weigh the risks and rewards of entering the market.