It’s a small piece of good news for banks in the slowing housing market.
There has been a mini surge in mortgage and refinancing applications spurred by falling mortgage rates, the Wall Street Journal reports. The volume of mortgage applications went up 18 percent last week from the week before, while refinancing applications rose 39 percent, reaching their highest level since November, 2016. The Journal also found that purchase applications had risen 4 percent.
This may be the result of lower mortgage rates. Last week Freddie Mac reported rates were down to 4.06 percent, the lowest since January 2018.
While higher rates are traditionally seen as beneficial to banks, allowing them to charge more for loans, they can also slow home sales and mortgage refinancing. Profitability dropped 19 percent on average between 2017 and 2018 for top 24 banks that reported their mortgage-banking results, the Journal found.
The mini-surge in refinancing, even if it is only short-lived, will be a boost for banks like Wells Fargo and JPMorgan Chase that are big mortgage lenders.
Rates would need to continue falling to keep the current refinance boom going through another quarter, Jack Micenko, an analyst at Susquehanna International Group LLP, told the Journal. [WSJ] — Decca Muldowney