Is the Mortgage Refinance Boom Over?

April 23, 2019 by Ruby Keys

After declining for four weeks straight, a jump in conventional mortgage rates sent new originations tumbling 11 percent. Last week, the rate for a 30-year fixed-rate mortgage increased to 4.40 from 4.36 percent a week earlier.

Over the last month, mortgage originators were experiencing a quick mortgage boom as rates dropped week over week.  However, with rates bumping up a bit, mortgage application volume decreased by 5.6% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.

Although they slipped some last week, originations were still up 24% over this time one year ago, thanks to homeowners refinancing in advance of anticipated rising rates.

The precipitous drop in refinance originations is indicative of how homeowners and buyers are becoming hyper-sensitive over mortgage rates.  Rates have been dropping over the past four weeks to the lowest levels in over a year.  This drop came as a surprise to many, as the economy continues to hum along.

The average rate for a 30-year fixed-rate for conforming ($484,350 or less) residential mortgage rose to 4.40% with points increasing from 0.44 to 0.47 for loans with a 20 percent down payment.

The drop in rates began just before the Federal Reserve announced on March 21 that they were not projecting any more rate hikes for the remainder of 2019.  The decline in rates coupled with the Fed news sent refinance applications soaring.

Although rates rose slightly last week, they are still a quarter of a percentage point lower than they were a year ago.  However, so many homeowners have already refinanced, taking advantage of record low rates over the past few years, that the pool of refinancing borrowers is quickly shrinking.

Mortgage originations for home purchases increased 1 percent over the previous week but were up 13% from last year at this time.  Applications for buyers of new construction are also on the uptick.  The MBA reported that the number of new construction purchases rose 7% annually in March, which is interesting, given the drop in the size of loan amounts.

With the Federal Reserve predicting a slowdown in economic growth and indicating its intention to resist raising rates for the remainder of the year, loan originators are looking to take advantage of stable rates and the continued demand for housing in 2019.