Residential mortgage refinancing activity in the United States hit a six-month high last week, a trade group says, fueled by a third straight weekly drop in borrowing costs, following two slumps major banks that have clouded the outlook for interest rates.
The Mortgage Bankers Association’s (MBA) weekly index of overall home loan application volume rose 2.9%, marking a fourth week of gains, the longest in four years. This increase was due to a 4.8% increase in requests to refinance an existing loan, which took this activity to its highest level since last September and moved it away from a two-decade low reached in the end of last year. Loan applications for the purchase of a home increased by 2%.
The average contract rate for a 30-year fixed-rate mortgage, the most popular home loan, fell to 6.45%, its lowest level in six weeks, according to the MBA.
“While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, buyers reacted, leading to a fourth consecutive increase in buying requests,” said Joel Kan, vice president. -president and deputy chief economist of the MBA, in a press release. “House price growth has slowed markedly in many parts of the country, which has helped improve the purchasing power of buyers.”
The Federal Reserve’s rapid interest rate increases over the past year – aimed at reducing inflation from 40-year highs reached last summer – have had a devastating effect on the housing market, pushing mortgage rates above 7% last fall, driving down home sales and causing a near-crisis in lending for new purchases and refinances.
Last week’s data, however, showed that the worst may be over for residential real estate, as both new and existing home sales rose in February.
In addition, uncertainty looms over the extent of the Fed’s interest rate hike, after the failures of Silicon Valley Bank and Signature Bank within days of each other in early March , gave rise to emergency measures aimed at consolidating the banking system as a whole. It also led the US central bank to adopt a more cautious policy at its last meeting last week.
Refinance activity hit its lowest level since 2000 in the last week of 2022, and with the latest surge it has now rebounded over 60%. That said, it’s still about as low as it was a year ago, and it’s unclear if it still has much potential unless rates drop further significantly from now on. .
“Most homeowners still have rates well below current levels, which only encourages a small number of borrowers to refinance,” Kan said.
