With mortgage interest rates at historic lows, the volume of refinancing activity jumped 79% last week and was up nearly five-fold from year ago levels, the Mortgage Bankers Association reported Wednesday.
The MBA said the drop in mortgage rates is spurring many homeowners to refinance their mortgages to take advantage of the record low borrowing rates.
“Loan officers are extraordinarily busy right now and there is a lot of opportunity for folks with mortgage rates above 4.5% to shorten or lower their payments with the rates available now,” said Brandi Pearl Thompson, president of the Greater Chattanooga Realtors association. “If you want to buy now, you better be ready because loan officers are handling a lot of refinancing activity.”
The same coronavirus that pushed Wall Street into bear market territory in the past month has also cut the Treasury bill rates to all-time lows and helped push down mortgage and other long-term interest rates to the lowest level in more than seven years.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) matched the December 2012 survey low of 3.47% last week. Other reads on mortgage rates, like Freddie Mac’s weekly index, had the average rate hitting a record low.
“Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47 percent,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.. “Homeowners rushed in, with refinance applications jumping 79 percent – the largest weekly increase since November 2008.”
In response to the current interest rate environment, MBA now forecasts total mortgage originations to come in around $2.61 trillion this year, a 20.3% gain from 2019’s volume of $2.17 trillion.
Refinance originations are expected to double earlier MBA projections, jumping 36.7 percent to around $1.23 trillion. Purchase originations are now forecasted to rise 8.3 percent to $1.38 trillion.
For home buyers, Thompson said the drop in mortgage rates gives buyers more purchasing power and potentially provides sellers the ability to charge higher prices. With a relatively tight market for available houses on the market in Chattanooga, the median home price has increased $25,000 over the past 12 months from $180,000 in January 2019 to $205,000 in January 2020.
“While prices have increased, this cut in rates can help propel the market and allow buyers to buy in a slightly higher price point and have almost the same payment,” Thompson said.
MBA has nearly doubled its 2020 refinance originations forecast to $1.2 trillion, a 37 percent increase from 2019 and the strongest refinance volume since 2012.