Record Low Interest Rate Fuels Refinancing Wave


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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