With mortgage interest rates rising, fewer homeowners are benefitting from mortgage refinancing. As a result, there has been a 2.6% drop in total mortgage refinance application volume, according to the Mortgage Bankers Association.
During the week of May 18, the volume of mortgage refinance applications were an eye-popping -10.5% lower when compared with the same week in 2017.
The volume of these mortgage refinance applications are calculated by week, month and year. Just last week, the volume of mortgage refinance applications dropped -4% to its lowest level since December 2000. The volume of these refinance applications is currently -27% lower than last year’s volume.
Most borrowers who have been able to qualify for mortgages from the get go in the buying process have already refinanced during the last 5 years as mortgage interest rates stalled near record lows. Now, only 36% of all mortgage application volume is defined by mortgage refinance applications.
The average contract interest rate for a 30-year fixed mortgage with conforming loan balances ($453,100 or less) has increased to its highest level (from 4,77% to now 4.86%) since April 2011. Points too have increased to 0.52 from 0.50 (including origination fees) for 80% loan-to-value ratio loans.
Straightforward mortgage applications to purchase homes also fell 2% during this same week. Compared with 2017, the volume of mortgage applications is just +3% higher.
Lack of supply continues to be the main story despite interest rates rising at an increasingly fast clip. Lack of inventory + strong demand = higher home prices.
Joel Kan, an analyst with the Mortgage Bankers Association, said, Purchase applications are decreasing while average loan amounts for purchase loans are increasing to +$320,000 from $317,000 last month. This is a sign that inventory for lower priced homes remains low. The mix is still skewed towards larger loan balances while the share of borrowers applying for Adjusted Rate Mortgages (ARMs) foes up. ARMs are more popular when prices rise and it’s harder to afford a home.”