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The pause in mortgage applications as the Covid epidemic took hold is looking like a mere blip in the distant past as buyer activity surges, according to the latest weekly data numbers. The Mortgage Bankers Association weekly report shows purchase applications rose 33% compared to this week last year, or 5% compared to the week before. The week included the Fourth of July holiday which shows how strong buyer demand since it increased, even during one of the slowest weeks of the season.
Refinance applications also saw an increase of 111% compared to the same week in 2019. It only saw a slight uptick compared to the week preceding this one, with a .4% increase in applications. However, they still made up 60% of the total applications. This number could continue to decrease since, as the report points out, the past few months have seen strong refinance activity already and it could be a sign the population eligible for refinancing is dwindling in numbers.
It is the record low interest rates driving all this activity. Last week average mortgage rate decreased to 3.26% from 3.39% for a non-jumbo 80% loan-to-value application. For jumbo loans over the $510,400 conforming loan limit interest rates decreased to 3.52% from 3.59%. Now they have decreased yet again, to 3.03%, according to a statement from Freddie Mac today.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said in a statement, “The average purchase loan size increased to $365,700 – also another high – as borrowers contend with limited supply and higher home prices.”
When I last wrote about the sudden surge in applications, I spoke with several lenders who have fully digital applications processes and were able to continue operating during shelter-in-place orders. They all saw drastic increases during the spring and that trend has continued now into summer. Better.com, for example, has seen a 124% growth in refinancing since Covid began and Guaranteed Rate set yet another company record in June for the most locked volume in a single month of $10.5 billion. This was after setting company records in February with $6.8 billion.
Both companies report there hasn’t been a change in credit worthiness of the buyers applying for a mortgage, but the age of applicants is showing signs of getting lower. According to Sarah Pierce, Head of Sales at Better.com, “Since COVID-19 began, we’ve seen the average homebuyer’s age drop by 3 years to 38 years old. Many homebuyers today and in the months following may be influenced by the stability of homeownership and the comfort of owning a safe space in the chaos.”