Buyers are rapidly returning to the housing market, tempted by record low interest rates on mortgage loans and, as never before, a pressing need to “build the nest” provoked by a coronavirus pandemic, writes CNBC.
Mortgage applications for house purchase increased 4% in the second week of June compared with the previous week and was 21% higher than a year ago, according to seasonally adjusted index of mortgage bankers Association. It was the ninth week of growth and the maximum for the last 11 years.
“The housing market continues to experience unmet demand since the beginning of this spring, as well as a gradual increase in consumer confidence,” said MBA economist Joel Kahn.
Buyers are also motivated by the new record low mortgage rate. The average interest rate under the contract for 30-year mortgages with a fixed interest rate with the appropriate balance of the loans ($510 400 or less) decreased to 3.30% from 3.38%, with points decreasing to 0.29 from 0.30 (including the issue fee) for loans with a first payment of 20%.
Lower rates have also stimulated demand for refinancing. The number of these applications increased by 10% for the week and was 106% higher than a year ago. Refinancing has been falling for several weeks, but a new record-low interest rates may have prompted some homeowners to potential savings.
“Refinancing continues to support the finances of households as homeowners who carry out refinancing can save on their monthly mortgage payments in a period of uncertainty associated with the economic recovery,” said Kahn.
The share of refinance mortgages increased to 63.2 per cent of the total number of applications to 61.3% in the previous week. At such low fixed interest rates, the share of mortgage loans with an adjustable interest rate dropped to 2.8% of the total number of applications. ARM loans (the mortgage rate) have lower rates but a higher risk.
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