A sharp drop in mortgage interest rates had borrowers rushing to their lenders last week.
Refinance volume spiked, sending total mortgage application volume up 15.1% for the week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.57% from 3.73%, with points decreasing to 0.26 from 0.27 (including the origination fee) for loans with a 20% down payment. Rates are even lower now. One year ago, the average rate was 4.67%, 110 basis points higher.
That drop caused a 26% surge in weekly refinance applications. Compared with one year ago, refinance volume was nearly 224% higher. An MBA spokesman said they will be updating their annual forecast later this week, calling for a big uptick in refinances.
“The 30-year fixed rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility,” said Mike Fratantoni, MBA’s senior vice president and chief economist. “Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize.”
Detroit-based Quicken Loans saw record-setting volume on Monday and Tuesday, as rates fell to a record low. CEO Jay Farner said the new ways of processing loans are making it easier to handle even tremendous volume spikes.
“The way that we leverage technology to communicate with our clients, to make it easy for them to make a mortgage application, for our underwriters, we can scale very quickly, which helps us when we see increased volume like this,” said Farner. “As application volumes increase, our turn times are remaining steady. We can scale with our clients and still can expect to make application and close a mortgage within a few weeks and not have to wait months and months as volumes increase.”
Mortgage applications to purchase a home fell for the week, down 3%, but were 10% higher than a year ago. The drop in rates, though good for buyers, is due to wild market volatility and concern about how the coronavirus will affect the economy. That may be causing some buyers to pull back on what is, for most Americans, their single largest investment.