US Mortgage Refinance Index Fell 8 Out Of The Last 9 Weeks

US mortgage refinance index fell eight out of the last nine weeks. Mortgage Bankers Association (MBA) data showed that the refinance index decreased by 5.3 percent in week ending April 2, 2021 (v -2.5 percent w/w prior) to the lowest since February 2020. As a result, US mortgage refinance applications fell 19.3 percent year to date and were down 20.4 percent compared with the same week one year ago. Therefore, the refinance share of mortgage activity decreased to 60.3 percent of total applications from 60.6 percent the previous week.
 

The decline came as the 30-year mortgage rates rebounded to 3.36 percent last week (up from 3.33 percent prior) and is now up 50 basis points since the start of 2021. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, highlighted “Overall, refinance demand has decreased, with volume over the past 10 weeks down by more than 30 percent.” In other words, higher mortgage rates are still shutting down refinance activity, as the pool of borrowers who can benefit from a refinance further declines.

On the positive side, mortgage rates have retraced this week after refusing to break through recent highs. “The evidence for a supportive shift in the rate environment is beginning to mount,” wrote Matthew Graham, chief operating officer of Mortgage News Daily.

In the meantime, mortgage purchase applications fell for the second straight week and reached a 5-week low. Kan underlined that “The return of rates to the highest level since last June contributed to a slowdown in applications for both purchases and refinances. The rapidly recovering economy and improving job market is generating sizeable home buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory“.

Last week, we saw that housing prices are overheating amid tight inventory. As a matter of fact, the FHFA (Federal Housing Finance Agency) purchase-only price index rose 12.0 percent YoY in January (the largest increase on record and up from 11.4 YoY percent in December).