Ultra-Low Rates Fuels New Push For Mortgage Refinancing

Borrowers seeking to refinance their mortgages took advantage of the record low 15-year mortgage rate and the six-month-low on the 30-year fixed mortgage rate last week, according to new data from the Mortgage Bankers Association.

What Happened: The MBA’s Market Composite Index, a measure of mortgage loan application volume, registered a 5.7% week-over-week increase on a seasonally adjusted basis for the week ending July 23. On an unadjusted basis, the index was 6% higher compared with the previous week.

The upward movement was fueled by refinancing activity.

The Refinance Index was 9% above the previous week’s level, although it was 10% lower than the same week one year ago. The refinance share of mortgage activity accounted for 67.2% of total applications, up from 64.9% one week earlier.

As for the purchase loan side of the mortgage market, the seasonally adjusted Purchase Index was down 2% from one week earlier to its lowest level in 14 months, and the unadjusted index was 1% lower as well as being 18% lower than the same week one year earlier.

Why It Happened: “The 10-year Treasury yield fell last week, as investors grew concerned about increasing COVID-19 case counts and the downside risks to the current economic recovery,” said Joel Kan, MBA's associate vice president of economic and industry forecasting. “Refinance applications jumped, as the 30-year fixed mortgage rate declined to its lowest level since February 2021 and the 15-year rate fell to another record low dating back to 1990.

“Refinances for conventional loans increased over 11%,” Kan added. “With over 95% of refinance applications for fixed-rate mortgages, borrowers are looking to secure a lower rate for the life of their loan.”

Kan also observed that the purchase loan activity is being hampered by increasing home prices and growing competition among buyers for a limited housing inventory. He noted data from the Federal Housing Finance Agency that found “May home prices were 18% higher than a year ago, continuing a seven-month trend of unprecedented home-price growth.”

Photo: Arek Socha / Pixabay.