E Economics

US Mortgage Refinance Index Fell 9 Out Of The Last 10 Weeks

14 April, 2021
Mortgage Refinance Index

US mortgage refinance index fell nine out of the last ten weeks. Mortgage Bankers Association (MBA) data showed that the refinance index decreased by 5.0 percent in week ending April, 9 2021 (v -5.3% prior) to the lowest since February 2020. As a result, US mortgage refinance applications fell 23.3 percent year to date and were down 31.3 percent compared with the same week one year ago. Therefore, the refinance share of mortgage activity decreased to 59.2 percent of total applications from 60.3 percent the previous week.

The index kept falling despite the 30-year mortgage rates dropped to 3.27 percent last week (down from 3.36 percent prior) but is still up 41 basis points since the start of 2021. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, highlighted “Refinance activity has now decreased for nine of the past 10 weeks, as rates have gone from 2.92 percent to 3.27 percent over the same period. Last week’s index level was the lowest in over a year, as mortgage rates continue to trend higher. Many borrowers have either already refinanced at lower rates or are unwilling – or unable – to refinance at current rates.” 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.

In the meantime, mortgage purchase applications fell for the third straight week and reached a 6-week low. Kan underlined that “The third straight week of declining purchase activity is a sign that rising home prices and tight supply are constraining home sales – especially in the lower price tiers. Purchase applications were still above last year’s pandemic-impacted low point, but fell behind the level of activity seen the same week in 2019.

Last month, we saw that housing prices were 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).

U.S. housing prices (FHFA)