U.S. mortgage rates edge modestly higher last week, but new applications fell and activity slowed amid a record surge in jobless claims and the ongoing economic shutdown triggered by the coronavirus pandemic.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 rose 2 basis points in the week ending April 3 to 3.49%, just abve the record low recorded for the prior week and in early 2012.
The group's refinancing index, meanwhile, slumped 19.4% to 3,853.1 points and new purchase activity fell by around 12.2%, to the lowest level since 2015, as more than 10 million Americans filed for unemployment benefits of the final two weeks of March and data began to illustrate the depth of the coronavirus damage to the U.S. economy.
"With much less liquidity and tighter credit in the jumbo market, average loan sizes declined, and mortgage rates for jumbo loans increased to a high last seen in January,” said Joel Kan, the MBA's associate vice president of economic and industry forecasting.
“Refinance applications dropped 19%, reversing a 25% increase the week before," he added. "Given the ongoing rate volatility, along with the persistent lack of liquidity in certain sectors of the MBS market, we expect to see continued weekly swings in refinance activity.”
The MBA also said earlier this week that new rules on mortgage forebearance under the $2.2 Trillion CARES Act, which allow borrowers to delay repayments by as much as a year, triggered a near 2,000% increase in requests over the final two weeks of last month.
"The mortgage industry is committed to providing this much-needed forbearance as mandated by law under the CARES Act. It is expected that requests will continue to skyrocket at an unsustainable pace in the coming weeks, putting insurmountable cash flow constraints on many servicers - especially IMBs," said chief economist Mike Fratantoni.
Last month, the Fed said it would buy unlimited amounts of Treasury bonds and mortgage-backed securities (MBS) "to support smooth market functioning" amid the coronavirus pandemic and historic selling on Wall Street.
The Fed began buying up to $40 billion of agency MBS, issued by Ginnie Mae (the National Mortgage Association), Freddie Mac (the Federal Home Loan Mortgage Corporation and Fannie Mae (the Federal National Mortgage Association), which make up around two-thirds of the overall mortgage market.