Record Low Interest Rate Fuels Refinancing Wave

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The Mortgage Bankers Association’s (MBA) latest Weekly Application Survey shows that, for the week ending November 27, 2020, mortgage application activity decreased by 0.6% from the prior week on a seasonally adjusted basis, as indicated by its Market Composite Index. One of its two constituent indexes, the Purchasing Index, increased by 9% from the previous week while the other, the Refinance Index, decreased by 4.6%. The MBA’s tracked 30-year fixed-rate mortgage rate measure decrease by 7 basis points from two weeks prior to 2.92%, a new record low for the series. It remained unchanged from the previous week.

Despite the latest week’s faltering in refinancing activity, year-over-year gains for Purchasing and Refinancing, that is, the percentage gains in the index levels compared to the same week one year ago, continue to show strength at 28% and 102%, respectively. The latest week’s year-over-year gain in refinancing was the highest in 5 months of weekly activity.

The refinance share of mortgage activity decreased to 69.5 percent of total applications from 71.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 1.8% of total applications.

The MBA cited that the average loan size also hit a record high of $375,000 last week. Consistent with earlier weekly surveys, it supports the emerging trend of homebuying being more accessible to higher income-earning homebuyers, who are less likely to be first-time homebuyers. Even in the current, challenging economic times, the housing market is strong, supported both by high demand and tight inventory.



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