Providing mortgage credit reports, related services & technology solutions for over 75 years.



Mortgage applications higher due to historically low rates

November 1, 2019

By the third week in October 2019, mortgage application volume was over 50% higher than it had been a year before, yet saw drop of nearly 12% in volume compared to the previous week, according to CNBC.

Specifically, housing stock for the week starting October 13 was 54% higher than it was the year before and mortgage application volume fell by 11.9% week-over-week, according to the Mortgage Bankers Association's seasonally adjusted index - cited in the CNBC report.

The dynamic has been attributed to the fact that mortgage rates rose to their highest levels in three months, yet have consistently remained at their lowest levels in recent history, according to the Honolulu Star-Advertiser. According to a recent Freddie Mac forecast, the rate for a 30-year fixed-rate mortgage rose from 3.57% to 3.69% the week of October 13 compared to the week before, while 15-year rates increased from 3.05% to 3.15%.

Tracking mortgage rates in October
A report published for the following week, starting October 20, showed interest rates increased further and the average fee on 30- and 15-year mortgages was the same, at 0.5 points, the Star-Advertiser reports. That week, the 15-year interest rate rose to 3.18% and the rate on a 30-year fixed mortgage rose to 3.75%, which is a decrease of 4.9% compared to last year, according to The Star Advertiser. The benchmark 30-year interest rate is still predicted to stay below four percent (not including any points from fees) through the end of 2019, at most, according to the forecast; Yahoo also reported that the Federal Reserve would be making further rate cuts by the end of the year.

Mortgage Bankers Association Senior Vice President and Chief Economist Mike Fratantoni claims mortgage interest rates "continue to be volatile" amid recent key Brexit votes and ongoing global trade negotiations.

Mortgage application volume decreased week-over-week in October 2019, yet was higher than the same timeframe last year due to the fact that historically low mortgage interest rates remained.

"Borrowers with larger loans are the most sensitive to rate changes, and with rates climbing higher last week, the average size of a refinance loan application fell to its lowest level this year," Fratantoni told Yahoo.

Low property inventory, high refinancing activity

According to CNBC, the ability to take advantage of the current low-rate situation has been increasingly difficult due to the fact that home prices have risen in the face of a "severe shortage" of properties for sale amid high consumer demand. Due to the rising prices, existing home sales fell "more than expected" in September after a 17-month high in August, the Star-Advertiser reported. On the contrary, new home sales increased by 15.5% compared to the previous year and single-family home construction has "ticked up," according to the Star-Advertiser.

As a result of the relatively low interest rates lately, there have been twice as many mortgage refinancing applications compared to the same time the year before, with "strong" volume across recent months, according to CNBC. During the week of October 13, mortgage refinancing starts comprised just over 58% of all application types - less than the 62.2% share recorded the week prior, according to Yahoo! Finance. Compared to one year prior, refinancing demand was 126% higher. Fratantoni claimed in his interview that the average size of a refinancing loan application fell to its lowest level in 2019.

Freddie Mac and Fannie Mae announce changes to loan application

Freddie Mac's report for the week of October 20 comes as the government-sponsored mortgage lender and its sister entity - Fannie Mae - announced that the Uniform Residential Loan Application had been redesigned to remove the language preference question and housing counseling information, according to HousingWire. The Mortgage Bankers Association argued that in particular, the language question could "cause more problems than it solves." Several members of Congress stated their opposition to the change, arguing that it could further restrict credit access for borrowers already facing barriers.




If you liked this article, consider signing up for our weekly Buzz recap email! Sent every Friday morning, it's a quick way to catch up on all the industry news and happenings at Avantus. Click here to sign up!