U.S. mortgage rates fell to a fresh record low last week, data from an industry lobby group indicated Wednesday, triggering another surge in refinancing activity as house prices continue to climb even amid the coronavirus pandemic.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 fell 8 basis point to 3.06% for the week ending August 7, a new all-time low that's more than half a percent lower than in March of this year.
The MBA's refinancing index rose 9.1% to 4,025.0 points, the highest level in four months and 47% higher than during the same week last year, while mortgage applications jumped 6.8%. The seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single family home, rose 2% to 306.6 points.
"Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows," said Joel Kan, the MBA's associate vice president for economic and industry forecasting. "Refi activity responded to these lower rates, with the refi share reaching almost 66% of all applications, its highest level since May. And the refi index jumped 9%, reaching its highest level since April, as both conventional and government applications for refinances increased.”
“Home purchase activity continued its strong run with a 2% increase over the week and was up around 22% compared to the same week a year ago," he added. "While this was still positive news for the purchase market, the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support."
The resilience of the U.S. housing market has been one of the standout results of the coronavirus pandemic, as low market rates have forced down mortgage costs while a dearth of new home sales has kept prices elevated even amid near-record job losses and the expiration of emergency unemployment benefits.
Housing starts rose 17.3% in June to a seasonally-adjusted pace of 1.186 million units, the Commerce Department said last month, the biggest gain in nearly four year. However, the pace of homebuilding is still down 24.3% from February levels, adding upward pressure to house prices.
In fact, the baseline for national home prices has been rising for several months, with the closely-watched Case-Shiller index up 0.3% in May, lifting prices in the ten biggest metropolitan markets up 3.1% from the same period last year.