Mortgage Rates further declined to a new all-time low as of May 28, 2020, marking the third time that the record was broken in the last few months while refinancing activity is almost flat, latest reports said.
Mortgage rates at an all-time low
The 30-year fixed-rate mortgage average went down 3.15 percent, sliding from 3.24 percent from one week ago and 3.99 percent from the same period last year. The declines are triggering housing purchase demand, which has rebounded from 35 percent decline year-over-year in mid-April to climb 8 percent last week, the Freddie Mac report said.
The 15-year fixed-rate mortgage average was down from 2.70 percent a week ago to 2.62 percent. Year-over-year, it also declined from an average of 3.46 percent. The 5-year Treasury-indexed hybrid ARM, meanwhile, averaged 3.13 percent, which is down from 3.17 last week and down from 3.6 during the same period last year.
Experts attributed the declines to the Federal Reserve's move to stimulate the demand by purchasing mortgage-backed securities, Housingwire noted. The Fed is the biggest purchaser of mortgages for now, with more than $500-billion of MBS bought since the initiative commenced in March.
The past weeks saw the financial volatility decreasing, MarketWatch reported, which benefited the stock market and mortgage rates. That helped home buyers become more confident to enter the market, as shown in the surge in mortgage applications for home loans.
Mortgage applications rose 2.7 percent from a week before, the Mortage Bankers Association reported. For the week ending May 22, 2020, the Marker Composite Index has risen 2.7 percent on a seasonally adjusted basis; Purchase Index, meanwhile, increased 9 percent.
Purchase applications rise, refinance activity almost flat
Purchase applications, on the other hand, increased by 9 percent, which is the sixth weekly consecutive jump. The increase in purchase applications also reflects a 54 percent rise since April. In addition, the purchase loan amount continued to rise and is currently at its highest level since the middle of March.
Many are still not looking to refinance, though, despite the mortgage rates dropping to record lows. Experts believe that this is due to lenders tightening their standards and the unemployment rising, Forbes noted. The share of refinancing in total mortgage applications was down to 62.6 percent from 64.3 percent one week ago, according to the MBA weekly applications survey.
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Refinance activity is still 176 percent higher compared to the same period last year, though. This is despite conventional refinancing rising by just 2 percent and government refinancing applications being down by almost 7 percent, MBA Associate Vice President of Economic and Industry Forecasting, Joel Kan said.
At the state level, the non-seasonally adjusted percent change in the home purchase applications saw New York increase by 19.7 percent week-over-week while California and Washington increase by 11.6 and 3.5 percent, respectively.
As for government loans' share of total applications, FHA decreased to 11.2 percent from 11.5 percent a week before. VA share of total applications dropped to 12.4 percent from 13.4 percent, while USDA also declined to 0.6 percent from 0.7 the previous week.