Mortgage purchases are on the rise, while the number of refinancing applications is on the decline

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The busiest week for shopping in nearly two months was offset by a slower refinancing rate, leading to a slowdown in mortgage lending activity in the last full week of August.

The Mortgage Bankers’ Composite Market Index, a weekly loan application figure based on surveys of MBA participants, fell seasonally adjusted 2.4% for the week ending August 27, while the unadjusted index was down 3% since levels of the previous week… The seasonally adjusted loan volume for the week was 4.7% lower than in the same period last year.

The Composite Index declined over the week despite an increase in buy orders, while the Buy Index was up 1% on a seasonally adjusted basis. Unadjusted purchases were down 2% from a week earlier and were 16% lower than in the same week a year earlier. While the gain was modest, it signaled a deviation from the pace a month ago when the index fell to the lowest point more than a year.

“Even with a modest increase, buying activity reached its highest level since early July, as the number of applications for regular and government loans increased,” Joel Kahn, MBA’s deputy vice president for economic and industry forecasting, said in a press statement.

However, the volume of refinancing decreased, which led to a decrease in the composite index. The refinancing index was down 4% from the previous week, but rose 2% from the same week a year ago.

“Despite the low rates, refinancing applications have declined and some borrowers are still waiting for rates to drop even lower,” Kahn said. “Recent economic uncertainty and the pandemic have kept rates low over the past month, so the refinancing index has hovered around these levels.”

Refinancing also accounted for a smaller share of total activity – reflecting both its slowdown and the recent renewed interest in buying – at 66.8%, up from 67.8% a week earlier.

The share of adjustable rate mortgages rose to 3.2% of the total, from 3.1% in the previous week.

Increase in average loan size
While volumes fell, the average dollar amount of new mortgage applications rose weekly in both purchases and refinancing. Average purchase size rose 1% to a five-week high to $ 396,500 from $ 392,400, while average refinancing increased to $ 305,800 from $ 304,600 the previous week, i.e. by 0.4%. Among apps as a whole, the average size increased 0.8% to $ 335,900 from $ 333,300.

Higher average purchase amounts indicate that buying activity continues to be dominated by higher market price levels, Kahn said. The latest figures from the Federal Housing Finance Agency show that 17.4% surge in house prices between the first and second quarters of this year. In June, prices rose 18.8% over last year.

“Both measures set new records as demand for housing continued to outpace the number of homes for sale,” Kahn said.

However, the proportion of applications filed through government-sponsored agencies in recent weeks offers some hope that more affordable homes are gradually becoming available. The share of loans issued by the Federal Housing Administration continued to grow and amounted to 11.2% of the total, compared with 11% in the previous week. However, the number of applications supported by the Veterans Administration has decreased compared to the previous reporting period from 10% to 9.7%. The share of mortgage loans taken out under USDA programs rose to 0.5% from 0.4% a week earlier.

Interest rates have changed little
As the pandemic and its economic aftermath remained in the headlines, interest rates remained virtually unchanged in either direction.

  • The average interest rate on 30-year fixed rate mortgages and a corresponding loan balance of US $ 548,250 or less remained at 3.03% on a weekly basis.
  • The average contractual interest rate on 30-year large fixed-rate loans with balances above $ 548,250 also remained unchanged, remaining at 3.13%.
  • The average interest rate on 30-year FHA-backed mortgages fell one basis point to 3.09% from 3.1% a week earlier.
  • The average interest rate on 15-year fixed rate mortgages rose to 2.39%, up one basis point from 2.38% a week earlier.
  • The average interest rate on 5/1 adjustable rate mortgages rose 12 basis points to 2.8% from 2.68% in the previous week.



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