Interest in refinancing mortgages soared to start the year, rising by 20% from the previous week.
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The surge in refinancing also led to overall demand for mortgage applications to increase by 16.7% from the prior week, according to the Mortgage Bankers Association's latest survey.
The previous week’s results included an adjustment for the holidays.
The number of people intent on purchasing a home rose in the past week by 8%.
“Booming refinance activity in the first full week of 2021 caused mortgage applications to surge to their highest level since March 2020, despite most mortgage rates in the survey rising last week," said Joel Kan, MBA’s associate vice president of economic and industry forecasting. "The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and rates higher."
The refinance share of mortgage activity increased to 74.8% of total applications from 73.5% the previous week.
Mortgage and refinancing demand rose despite the 30-year fixed mortgage rate climbing two basis points to 2.88%.
The 15-year fixed-rate mortgage, however, ticked down to 2.39%.
“Sustained housing demand continued to support purchase growth, with activity up nearly 10 percent from a year ago," added Kan. "The lower average loan balance observed was partly due to a 9.2 percent increase in FHA applications, which is a positive sign of more lower-income and first-time buyers returning to the market.”
The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.