Refinance Applications Up 59% Year-Over-Year
Applications rose the week ending Aug. 2, MBA survey indicates
Mortgage applications increased 6.9% last week from the week prior, with refinance transactions leading the charge.
The Mortgage Bankers Association’s (MBA) Weekly Applications Survey and Market Composite Index for the week ending August 2 increased 6.9% on a seasonally adjusted basis and 6% on an unadjusted basis.
The MBA’s Refinance Index in particular increased 16% from the previous week and was a whopping 59% higher than the same week one year ago. This was driven by a higher volume of VA applications and represented the highest amount of refinances in nearly two years time, according to analysts.
The seasonally adjusted Purchase Index increased 1% from the week prior, 0.3% on an unadjusted basis, and was 11% lower year-over-year.
“Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year,” MBA Vice President and Deputy Chief Economist Joel Kan said. “The 30-year fixed rate fell to 6.55%, reaching its lowest level since May 2023, following dove-ish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected.”
Kan noted the slight gain made in purchase applications, despite the downward movement in mortgage rates.
“For-sale inventory is beginning to increase gradually in some parts of the country and homebuyers might be biding their time to enter the market given the prospect of lower rates,” he pointed out.
Rocket Mortgage's Chief Business Officer, Bill Banfield, states that more than 15 million families who bought in the past year can refinance to today’s rates. On a $375,000 loan, this would lower the monthly mortgage payment from $2,568 to $2,338, saving the homeowner $230 a month and $2,760 a year.
"We track what interest rates people have in the marketplace. If you were to look at all of the securitizations of Fannie Mae, Freddie Mac, and Ginnie Mae, [there are] approximately 15 million loans outstanding with a rate of 6% or higher. That certainly doesn't mean every single person needs to run and refinance," Banfield said in a phone call with NMP. "I think what we're seeing here is this shift in interest rates creates an opportunity for some of those folks to take a look at the math and just see the benefits and ask if they can put themselves in a better situation."
Banfield conceded that mortgage rates are changing every single day. "After any time the market rallies, you tend to see rates fall a little bit, and then you see a little bit of a pullback, [which is] what we're now seeing today," he elaborated. "But in general, rates were well above 7% not that long ago. People that locked into those rates might want to look at refinancing."
It could be a good time for mortgage holders with FHA or VA loans to reconsider their options.
"[FHA and VA] have approximately a seven-month seasoning requirement from the first payment date of the prior loan. But the nice part about that is that it's so easy for the borrower if they made on-time payments to take advantage of a drop in interest rates," Banfield explained, "Again, so if somebody locked in at 7% or 7.5% and the rates are in the mid-sixes, it could be a really good time for somebody with those types of loans to take a look at refinancing."
Refinance Activity Data
Among total mortgage application activity for the week ending August 2, refinances comprised 41.7% of the share, up from 38.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.3% of total applications; the FHA share decreased to 13.4% from 14.25; the VA share increased to 14.3% from 13.5%, and the USDA share decreased to 0.4% from 0.5%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.55% from 6.82%, with points decreasing to 0.58 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $766,550) decreased to 6.77% from 7.07%, with points decreasing to 0.50 from 0.53 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.