Falling Mortgage Rates Lead to Surge in Refinance Activity

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Thanks to a huge jump in refinance volume, driven by falling rates, total mortgage application volume increased an impressive 26.8% on an adjusted basis during the week ended June 7, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.

The MBA notes that it made adjustments for the Memorial Day holiday, which fell during the previous week.

Applications for refinances increased 47%, compared with the previous week, while applications for purchases increased 10%.

On an unadjusted basis, total volume increased 38% compared with the previous week. Applications for purchases increased 20% on an unadjusted basis, and were 10% higher compared with the same week one year earlier.

“Mortgage rates for all loan types fell by a sizable margin for the second straight week, pulled down by trade tensions with China and Mexico, the financial markets reacting to more bearish communication from several Fed officials, and weaker than expected hiring in May,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “Despite the less positive outlook, both purchase and refinance applications surged, driven mainly by these lower rates. The refinance index jumped 47 percent to its highest level since 2016.”

Helping to drive the overall increase is the fact that the average rate for a 30-year fixed-rate mortgage hit its lowest level since September 2017.

Kan says although purchase volume is up 10% there likely has been “restraint from some prospective buyers, driven by some economic uncertainty.”

“Furthermore, housing supply is still very tight for first-time buyers,” he adds.

The refinance share of mortgage activity increased to 49.8% of total applications, up from 42.2% the previous week.

The adjustable-rate mortgage (ARM) share of activity increased to 7.9% of total applications.

The average rate for a 30-year fixed-rate mortgage, based on closings, was 4.12%, down from 4.23% the previous week.

The average rate for a 5/1 ARM was 3.43%, down from 3.62%.

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