Homeowners Seize Rate Dip To Restructure Mortgages
A growing number of homeowners capitalized on the opportunity to refinance their mortgages for the week ending May 17, attracted by the most favorable rates in over a month and a half.
For the week ending May 17, 2024, the Mortgage Bankers Association (MBA) reported that refinancing applications surged by 7% from the previous week, coinciding with a 30-year fixed mortgage rate dip to 7.01%, the third consecutive weekly drop.
Despite the spike in refinancing, the broader housing market shows a different trend, with an 11% decrease in new home purchase applications compared to last year. According to the MBA, the downturn reflects the dual pressures of limited housing availability and enduringly high prices.
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The recent rise in refinancing, part of a 21% increase from last year, marks a shift as homeowners respond to easing interest rates that had previously reached high levels.
The MBA reported that last week’s interest rate cuts across various mortgage categories prompted a wave of refinancing. "Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications," noted Joel Kan, MBA's vice president and deputy chief economist.
Rates for 30-year fixed-rate mortgages on standard loan balances edged down to 7.01% from 7.08%, accompanied by a drop in points to 0.60 from 0.63, which helps reduce upfront costs and increases the appeal of refinancing.
Even jumbo loans, typically used for more expensive properties, saw a rate decrease from 7.22% to 7.18%. Rates for government-supported loans, like FHA mortgages, fell to 6.77% from 6.86%, potentially aiding first-time buyers and those with lower credit scores.
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Notably, the FHA’s share of total applications slightly increased to 12.8%, while the VA’s share rose to 13.7%, indicating their sustained relevance to various borrowers.
However, the purchase market remains tough. The MBA indicated a 1% weekly drop in its Purchase Index and an 11% decline from last year, highlighting ongoing challenges.
The average loan size for home purchases increased to $444,000 from $437,700, showing market resilience. In contrast, the average refinancing loan size decreased, suggesting that more homeowners are choosing to refinance existing, more manageable mortgages.
What's Next
The recent uptick in refinancing is essential for understanding the current economic conditions influenced by inflation and Federal Reserve policy decisions.
As homeowners look to adjust their financial obligations amidst the pressures, the upcoming Fed meeting in June, where interest rates are expected to remain between 5.25% and 5.5%, will be crucial.
Any adjustments made by the Fed could further influence mortgage rates, potentially easing them and injecting more activity into the housing market.
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This article Homeowners Seize Rate Dip To Restructure Mortgages originally appeared on Benzinga.com
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