Another record low mortgage rate just caused demand to jump for both refinances and home purchases

Real Estate

In this Tuesday, July 17, 2012 photo, a single family home is offered for sale in the Hollywood area of Los Angeles. Average rates on fixed mortgages fell again this week to record lows, creating more incentive for buyers to enter the recovering housing market. Mortgage buyer Freddie Mac said Thursday, July 19, 2012, that the average rate on a 30-year loan fell to 3.53 percent. (AP Photo/Damian Dovarganes)

Damian Dovarganes

Mortgage interest rates have set record lows more than a dozen times this year, and last week there was yet another. That caused mortgage application volume to increase 3.9% compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Refinance applications led the way, climbing 5% for the week to the highest pace since last April. Volume was 79% higher than the same week one year ago. The refinance share of mortgage activity increased to 71.1% of total applications from 69.8% the previous week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to a survey low of 2.92% from 2.99%, with points falling to 0.35 from 0.37 (including the origination fee) for loans with a 20% down payment.

“Weekly mortgage rate volatility has emerged again, as markets respond to fiscal policy uncertainty and a resurgence in Covid-19 cases around the country,” said Joel Kan, MBA’s associate vice president of industry and economic forecasting.

While more than 4 million borrowers have already refinanced their home loans so far this year, over 19 million more could still save substantially on their monthly payments through a refinance, according to a recent calculation by Black Knight, a mortgage technology and data provider. Today’s average mortgage rate is about a full percentage point lower than it was a year ago.

Homebuyers are also getting added incentive from today’s rates, despite sharp increases in home prices. Mortgage applications to purchase a home rose 4% for the week and were 19% higher than the same week one year ago.

“Amidst strong competition for a limited supply of homes for sale, as well as rapidly increasing home prices, purchase applications increased for both conventional and government borrowers. Furthermore, purchase activity has surpassed year-ago levels for over six months,” Kan said.

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