E Economics

US Mortgage Refinancing Index Crashed To A 10-Month Low

31 March, 2021
US-mortgage-refinancing




 

US mortgage refinancing index fell seven out of the last eight weeks. Mortgage Bankers Association (MBA) data showed that the refinance index decreased by 2.5 percent in week ending March 26, 2021 (v -5.1 percent w/w prior) to the lowest since May 2020. As a result, US mortgage refinancing applications fell 14.8 percent year to date and were down 32.2 percent compared with the same week one year ago. In this context, the refinance share of mortgage activity decreased to 60.6 percent of total applications, from 60.9 percent the previous week.

 

US-mortgage-refinancing

 

The decline came as the 30-year mortgage rates fell to 3.33 percent last week (down from 3.36 percent prior) but is still up 47 basis points since the start of 2021. Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said “After seven consecutive weeks of increasing mortgage rates, the 30-year fixed rate declined 3 basis points to 3.33 percent, which is still almost half a percentage point higher than the start of this year. Mortgage applications for refinances and home purchases both declined“. In other words, “Higher mortgage rates continue to shut down refinance activity, as the pool of borrowers who can benefit from a refinance further shrinks.

 

In the meantime, mortgage purchase applications fell for the first time in five weeks. Kan underlined that “Many prospective homebuyers this spring are feeling the effects of higher rates and rapidly accelerating home prices. Record-low inventory is pushing home-price growth at double the rate from a year ago, and even above the 10 percent growth rates seen in 2005. The housing market is in desperate need of more inventory to cool price growth and preserve affordability.

 

We saw yesterday 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).

 

U.S. housing prices (FHFA)