Refinancing activity is still gaining traction in a context where mortgage rates recently hit a new record low for the 16th time this year. Earlier this week, Freddie Mac highlighted “the 30-year fixed-rate mortgage (FRM) averaged 2.66 percent, the lowest rate in the survey’s history which dates back to 1971.”
In this context, for the week ended December 18, the Mortgage Bankers Association noted “The Refinance Index increased 4 percent from the previous week and was 124 percent higher than the same week one year ago.”
The report also showed that refinance share of mortgage activity accounted for 74.8% of applications, well above the 52.4% seen over the last half decade according to Bloomberg. It confirms that households benefited from the sharp decline in mortgage rates to refinance themselves and get more income to spend. This phenomenon partly explains why domestic consumption rebounded so strongly in 3Q (+41% QoQ Annualized according to BEA data).
On the positive side, refinancing activity could still increase in the coming weeks. In late November, Black Knight, a mortgage technology and data provider, revealed that “the number of “high-quality” mortgage refinance candidates jumped to 19.4 million“, which is the highest on record.