Homeowners were in a rush to take advantage of lower mortgage rates, as weekly refinance applications surged 26%, the Mortgage Bankers Association reported Wednesday. Refinance volume is now nearly 224% higher than a year ago.
Mortgage rates are falling due to fears of an outbreak of the new coronavirus in the U.S. The average 30-year fixed-rate mortgage dropped to 3.57% last week from 3.73% a week earlier, the MBA reports. A year ago, rates averaged 4.67%, 110 basis points higher.
“The 30-year fixed rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility,” says Mike Fratantoni, the MBA’s senior vice president and chief economist.
Total mortgage application volume—including those from home buyers and refinancers—rose 15.1% this week compared to the previous week. However, applications to purchase a home dropped 3% last week; they are still 10% higher than a year ago. Economists say that while a drop in rates is appealing to buyers, market volatility and concern about how the coronavirus will affect the economy may be holding some back in moving forward on a home purchase.
Following the Federal Reserve’s emergency meeting to cut its federal funds rate this week, the 10-year Treasury note—which mortgage rates tend to follow—dropped below 1% for the first time.
"Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize," Fratantoni says.
Source: “Mortgage Applications Surge as Rates Plunge,” The Motley Fool (March 4, 2020) and “Weekly Mortgage Refinances Spike 26% as Interest Rates Tank on Coronavirus Fears,” CNBC (March 4, 2020)
