U.S. mortgage refinancing applications retraced last week. Mortgage Bankers Association (MBA) data showed that the refinance index decreased by 4.7 percent in week ended Jan. 15 (v +20.1 percent w/w prior). However, mortgage refinancing applications were up 86.7 percent compared to the same week one year ago.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said that “After a post-holiday surge of refinances, higher rates chipped away at demand. There was a 5 percent drop in refinance activity, driven by a 13.5 percent pullback in government refinances.” As a matter of fact, the report highlighted that the 30-year fixed mortgage rate rose to 2.92 percent (its highest level since November 2020 and up from 2.88 percent prior). The rate was 95 basis points higher one year ago. In the meantime, the average rate on the 15-year fixed rose for the first time in seven weeks, to 2.48%.
These findings look coherent with the report published by Freddie Mac last week which noted that the 30-year fixed-rate mortgage (FRM) averaged 2.79 percent (highest since mid-November). The ongoing rise in Treasury yields due to vaccines’ efficiency and expectations of further fiscal stimulus explained the rebound of mortgage rates.
Nevertheless, on the positive side, demand from homebuyers strenghtened despite the higher rates. In the details, mortgage purchase applications jumped 2.7 percent over the same week and were 16.9 percent higher than a year ago. In this context, Joel Kan added “Homebuyers in early 2021 continue to seek newer, larger homes. The average loan size for purchase loans jumped to $384,000, the second highest level in the survey.”
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