The average rate on a 30-year fixed mortgage saw a drop in the first week of December from the previous week, causing refinancings to surge 9%. Prospective home buyers have pulled back after a past surge.
The Mortgage Brokers Association’s weekly applications survey for the week ending Dec. 3, showed a 9% uptick in refinancings, while homebuyer demand for mortgages fell after four straight weeks of gains.
“While the 30-year fixed mortgage rate and 15-year fixed mortgage rate both declined only one basis point, the FHA rate fell 7 basis points, driving the surge in government refinances,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting in a Dec. 8 press release.
Mortgage applications to purchase a home decreased 5% for the week and were 8% lower than the same week one year ago, while applications fell after four consecutive increases, according to the MBA.
“Borrowers are continuing to act on these opportunities, but if rates trend higher as MBA is forecasting, the window of opportunity to refinance will continue to get smaller,” Kan said in the same release.
“Activity is still close to the highest level since March 2021, which is a positive sign as the year comes to an end,” said Kan, but that a lack of inventory, combined with rapid rates of home-price appreciation and mortgage rates higher than in 2020, could slow refinancing down.
Last week’s 1 basis point drop in mortgage rates was attributed by some to news of the omicron variant, a mutation of the Covid virus, that was first reported on Dec. 1 and whose severity risks are still unknown, according to CNBC.
The refinance share of mortgage activity increased to 63.9 percent of total applications from 59.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.0 percent of total applications.
Despite the refinancing surge, refinancings were still 37% lower than the same week one year ago, and home mortgage rates were 40 basis points lower.
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