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Mortgage-Purchase Demand Stalls Despite Record-Low Loan Rates

Mortgage-Purchase Demand Stalls Despite Record-Low Loan Rates
(FLYNT/Dreamstime)

By    |   Wednesday, 22 April 2020 12:30 PM

Mortgage purchase demand remained at a five-year low, while refinance demand stayed high despite record-low loan rates.

Total mortgage application volume decreased 0.3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Volume was 70% higher than a year ago, but that’s all because of refinances, CNBC explained.

Refinance demand slipped 1% for the week but was a sharp 225% higher than one year ago, when interest rates were over 1 percentage point higher, CNBC explained.

Refinance demand is also surging because some homeowners want to take cash out of their homes, worried that the economic downturn could worsen.

Mortgage applications to purchase a home increased 2% for the week but were 31% lower than the one year ago.

“The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround,” said Joel Kan, an MBA economist. “This has resulted in reduced buyer traffic, less inventory, and March existing-homes sales falling to their slowest annual pace in nearly a year,” Kan said.

Added Kan, "Despite the 30-year fixed rate remaining at a record low in MBA's survey, the refinance index dropped slightly last week but remained close to its 2013 highs. Borrowers continue to take advantage of low rates to gain some monthly savings, which is a welcome reprieve during these tough economic times."

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.45 percent.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.03 percent from 3.04 percent.

Meanwhile, almost 6% of U.S. mortgage borrowers have stopped making their payments following the passage of the CARES Act, which allows for easy forbearance.

The share of home loans in forbearance jumped to 5.95% during the week ended April 12, up from 3.74% the previous week, according to a survey from the Mortgage Bankers Association. Only 0.25% of all loans were in forbearance during the week of March 2, Bloomberg reported.

Home loans backed by Ginnie Mae, which are issued to riskier borrowers, again showed the largest weekly growth, with the share in forbearance climbing 2.37 percentage points to 8.26%. However, loans backed by Fannie Mae and Freddie Mac increased almost as fast -- by 2.20 percentage points -- to 4.64%.

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Personal-Finance
Mortgage purchase demand remained at a five-year low, while refinance demand stayed high despite record-low loan rates.
mortgage, purchase, demand, rates, home, loan
388
2020-30-22
Wednesday, 22 April 2020 12:30 PM
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