Applications

Falling Mortgage Rates Spur Application Frenzy – The Wall Street Journal


The volume of mortgage applications surged by 27% last week.


Photo:

Daniel Acker/Bloomberg News

Consumers are taking advantage of an unexpected decline in interest rates to buy homes and refinance their mortgages.

The volume of mortgage applications surged by 27% last week, the biggest weekly rise in more than four years, according to a survey released Wednesday by the Mortgage Bankers Association.

Much of the activity was spurred by falling rates, which pushed homeowners to trade higher-interest mortgages for lower-interest ones. Some 6.8 million borrowers stand to save at least 0.75 percentage point on a mortgage by refinancing, according to

Black Knight
Inc.,

a mortgage-data and technology firm.

Refinances were up 47% from the previous week, according to the Mortgage Bankers Association. Purchase applications were up 10% over the span, and many expect a continued boost in home sales as a result.

“I feel very good about the housing market,” said Lawrence Yun, chief economist at the National Association of Realtors. “Inevitability, I believe that home sales, which have been down year-over-year for many consecutive months, will turn positive in the second half of this year.”

Rates for 30-year fixed mortgages fell below 4% in recent weeks for their first time since 2017, and were most recently at 3.82%, according to a weekly average maintained by the government mortgage giant

Freddie Mac
.

Mortgage rates typically track the yield on the benchmark 10-year Treasury note, which has flagged recently, as investors reconsider the current U.S. growth outlook.

When Claire Murray and Mike Jacovino bought their home in West Hartford, Conn., last spring, they got a mortgage at a rate of 4.75%. It was slightly above the market rates at the time because they used a program that charged higher interest in lieu of paying for mortgage insurance.

About a year later, they went to refinance at the suggestion of Ms. Murray’s mother, a real-estate agent. Having built up 20% equity in the house, they avoided insurance and got a rate of 3.99% from their lender, Sanborn Mortgage Corp.

“We were a little worried about how much it might cost us, but looking at the numbers and how everything ended up, it was absolutely a no-brainer,” said Ms. Murray. The refinance cost them about $2,800, which they will recoup in monthly payment savings in less than a year and a half.

For lenders, which were hit hard by rising rates last year, the reversal has been a welcome sign. The outlook for lenders’ net profit margins turned positive for the first time in almost three years, according to a survey by

Fannie Mae

released Wednesday.

Quicken Loans Inc., the largest nonbank lender, is on pace to have its best month ever in June in terms of volume of closed loans. Jay Farner, the company’s chief executive officer, said it took a while for consumers to become aware of falling rates, but they now appear to be taking advantage.

“Probably the entire industry is benefiting right now,” he said.

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Write to Ben Eisen at [email protected]

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