Residential mortgage demand increases 33% as rates set new record

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After a brief decline in late June, home buyers rushed into the mortgage market last week, benefiting from record mortgage rates.Mortgage applications to buy a home increased 5% for the week and were 33% higher than a year ago, according to the Mortgage Bankers Association index, which was seasonally adjusted, including for July 4th vacation.

Buyers’ demand has been incredibly strong since mid-May, after the coronavirus closed most housing operations in April. The only thing standing in the way of increased sales is the record low supply of homes for sale.

Rising home prices continue to accelerate, so low mortgage rates give buyers the much needed help. The average contract interest rate for fixed rate mortgages over 30 years with compliant loan balances of up to $ 510,400 fell to 3.26% from 3.29%. Points, including set-up fees, for loans with a 20% down payment increased from 0.36 to 0.35.

“Mortgage rates fell to a new all-time low as renewed fears of a coronavirus resurgence offset the effects of a week of mostly positive economic data, such as June factory orders and jobs employee, “said Joel Kan, economist at the MBA. “The average size of purchase loans has increased to $ 365,700 – also another peak – as borrowers face limited supply and higher home prices. ”

Home loan refinancing requests, which are generally more sensitive to weekly interest rate fluctuations, only increased 0.4% from the previous week, but were 111% higher than one year ago. Since interest rates have been low and demand for refinancing has been strong for so long, only a limited number of borrowers can still benefit significantly from the new record low rate.

The refinancing share of the mortgage business decreased to 60.1% of total requests, compared to 61.2% the previous week.

Mortgage rates continued to drop early this week, especially after Tuesday’s stock market liquidation. Mortgage rates vaguely follow the 10-year Treasury yield.

“Forecasting is difficult, but what I can say is that many of us who are watching the market very closely are on high alert for signs that the low rate environment is under threat imminent, “said Matthew Graham, director of operations at Mortgage News Daily. . “While that may change with just one headline of coronavirus, we don’t see this threat to date. “

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