Homebuyers appear to have an insatiable appetite for new and existing homes, applying for mortgages at an incredible pace.
Mortgage applications to purchase a home rose just 0.4% last week from the previous week but were a remarkable 33% higher than a year ago, according to the Mortgage Bankers Association.
August is the new April, thanks to the coronavirus pandemic. Pent-up demand from the disastrous spring market and the new stay-at-home mindset combined to send more consumers rushing to either buy homes for the first time or upgrade what they already have.
Low mortgage rates are only adding fuel to the fire. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 decreased to 3.11% from 3.13%. Points, including the origination fee, increased to 0.38 from 0.36 for loans with a 20% down payment.
“The home purchase market remains a bright spot for the overall economy,” said Joel Kan, an MBA economist. “Mortgage rates at record lows and households looking for more space are driving this summer’s surge in demand.”
Applications to refinance a home loan declined 10% for the week but were 34% higher annually. The refinance market has been choppy, as rates made a dramatic move higher two weeks ago and then fell back only slightly. The refinance share of mortgage activity decreased to 62.6% of total applications from 64.6% the previous week, according to the MBA’s seasonally adjusted report.
That spike in rates was partially due to a recent announcement by Fannie Mae and Freddie Mac that they were raising lender fees specifically on refinances, starting Sept. 1.
“The fee is necessary to cover projected COVID-19 losses of at least $6 billion at the Enterprises,” according to a release from the FHFA, which oversees the two mortgage giants.
Amid heavy pressure from the mortgage industry, however, the FHFA announced late Tuesday a delay in the start date to Dec. 1.
“Extending the effective date will permit lenders to close refinance loans that are in their pipelines and honor the rate lock commitments they made to their borrowers, ensuring that economic relief in the form of record low interest rates will continue to flow to consumers,” said MBA CEO Bob Broeksmit.