Prospective homebuyers are continuing to come out of the woodwork to apply for purchase loans.
For the fifth consecutive week, a seasonally adjusted index that tracks mortgage applications to buy single-family homes increased from the prior week.
MBA’s refinance index, on the other hand, reported its fifth consecutive weekly decline. Seasonally adjusted refinancing applications fell by 6 percent compared to the prior week, when the index fell 3 percent. Refinancing activity last week was at its lowest level in more than a month, according to MBA — but still 160 percent higher than the same period last year.
The drop in refinancing requests pushed MBA’s overall adjusted index tracking home loan applications down 2.6 percent. It was flat for the past two weeks as refinancing applications ebbed.
MBA’s overall index tracks 75 percent of the U.S. home loan market. Refinancings represent the bulk of the applications, though their share has been sliding since mid-April. Last week, refinancings accounted for 64 percent of home-loan activity, down from 67 percent the week before.
Joel Kan, MBA’s executive at the helm of industry forecasting, said the average loan amount for refinancing applications also hit its lowest level last week since January: $299,400.
Kan said that could mean, in part, that “the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten.”
Despite the slowdown, Kan said that he expects that low interest rates will continue to drive strong refinancing activity.
The average contract interest rate for a 30-year mortgage of $510,400 or less was 3.41, a 2-basis-point drop from the prior week. The rate for jumbo loans fell to 3.66, a decrease of 3 basis points.
Kan said the low rates drove up purchase activity across all loan types, calling it an “encouraging turnaround,” though he said the increases may be related to purchases that were delayed, rather than a true uptick in prospective homebuyers.
“As states gradually re-open and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand,” he said.
Write to Erin Hudson at [email protected]