More Americans are applying for mortgage rates while fewer homeowners refinance their homes despite record low rates.
The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey found that homebuying mortgage applications dropped just 0.2% for the week compared to last. However, they were 28% higher compared to a year earlier.
“Lenders are reporting that the strong demand for home buying is coming from a delayed activity from the spring, as well as households seeking more space in less densely populated areas,” explained Joel Kan, the MBA’s associate vice president of economic and industry forecasting.
The uncertainty of the coronavirus pandemic resulted in a sluggish homebuying market in March, leading to increased demand in August with more Americans working remotely. Coupled with in-person school being delayed or held virtually in some parts of the country, the need for more space to have a proper work-life balance along with low mortgage rates is prompting consumers to consider buying now.
The average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances of $510,400 or less decreased to 3.08% from 3.11%, with points decreasing to 0.36 from 0.38, including the origination fee, for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week, the MBA noted.
“It’s possible that refinance demand may be slowing and will not significantly increase again without another notable drop in rates,” Kan said in a statement.
Home loan application to refinance decreased 3% for the week, despite being 40% higher compared to last year, the MBA data showed.