A move away from entry-level homes?
The Mortgage Banker’s Association or MBA recently released the results of a survey for the week ending October 2, 2020.
The volume of mortgage applications increased 4.6% from the previous week on a seasonally adjusted basis, or 5% on an unadjusted basis. The refinancing index also rose 8% from the previous week, which is 50% higher than the same week last year.
The increase in the volume of mortgage applications could very well be linked to the drop in mortgage rates reported by MBA. Many interest rates have fallen to record levels, according to Joel Kan, associate vice president of economic and industrial forecasting at MBA.
“Continuing the trend seen in recent months, the buying market is experiencing strong growth, with activity last week up 21% from a year ago,” Kan said. “Average loan size increased again to a new record high of $ 371,500, as activity in larger loan categories continues to lead the growth. “
Kan also reports that there could be a drop in demand at the entry-level housing market “due to barriers to supply and affordability, as well as the negative economic impact of the pandemic on hourly workers and low and moderate income households ”.
This is probably one of the reasons for the recent increase in average loan balances.
MBA also reports that the refinancing share of the mortgage business edged up to 65.4% from 63.3% the previous week. The variable rate mortgage, however, remained the same as the week before.
The survey found that the average contractual interest rate for 30-year fixed-rate mortgages with loan balances exceeding $ 510,400 fell from 3.33% to 3.31%. The average contractual interest rate for 30-year fixed-rate mortgages guaranteed by the FHA also fell from 3.15% to 3.12%.
MBA’s survey shows that the average contractual interest rate for 15-year fixed-rate mortgages fell from 2.65% to 2.59%, “with points dropping from 0.49 to 0.36 (including set-up costs) for 80% LTV loans.
The last significant interest rate cut of the week studied by MBA was in contractual interest rates for ARM 5/1, which fell to 2.80% from 2.95% the week before.