Homeowners rushed to refinance last week as mortgage rates fell, while applications from prospective homebuyers slowed.
The Mortgage Bankers Association’s refinance index increased 8 percent, seasonally adjusted, in the first week October, compared to the prior week. That’s highest level the index has reached since mid-August, and that figure marks a 50 percent year-over-year increase.
Joel Kan, MBA’s head of industry forecasting, attributed the surge to falling mortgage rates.
The rate for a 30-year, fixed-rate mortgage fell to 3.01 percent, down 4 basis points from 3.05 percent the prior week. Jumbo rates slipped to 3.31 percent from 3.33 percent.
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MBA’s index tracking the number of applications to buy homes last week dropped 2 percent, seasonally adjusted, compared to the week previous. The metric, known as the purchase index, was still up 21 percent year over year, however. It’s the 20th consecutive week the index posted annual growth.
Kan noted that the average size of a purchase loan hit an all-time record last week of $371,500, up from $370,700 the prior week.
He said that rising home prices and an historic low levels of inventory, layered with the pandemic’s disproportionate effect on lower-income households, is driving away homebuyers at the lower-end of the market. As a result, the market is made up of those willing and able to pay more, while “lower price tiers are seeing slower growth, which is contributing to the rising trend in average loan balances,” Kan explained.
MBA’s index tracking all home loans increased 4.6 percent, seasonally adjusted, driven by the swell of refinancing applications, which accounted for 65 percent of last week’s survey.
MBA’s weekly survey of the 75 percent of the residential mortgage market has been running since 1990.