U.S. Mortgage rates fell modestly last week, testing the all-time low from earlier this month, while new applications continued to rise even as homebuilding fell the most on record amid a freeze on new construction during the coronavirus pandemic.
The Mortgage Bankers Association said 30-year fixed rates for conforming loan balances of less than $510,400 fell 2 basis points to 3.41% for the week ending May 15, just above the record low of 3.40% and a full 1% lower from the same period last year.
The MBA's refinancing index fell 6.3% to 3,474.1 points, extending its slump to five consecutive weeks, but applications rose for a fifth consecutive week as the seasonally-adjusted Purchase Index increased 6.4% and purchase activity is just 1.5% lower from last year's levels.
“Government purchase applications, which include FHA, VA, and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months," said the MBA's vice president of economic and industry forecasting Joel Kan. "As states gradually re-open and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand.”
"Despite mortgage rates remaining close to record-lows, refinance activity slid to its lowest level in over a month," he added. "The average loan amount for refinances fell to its lowest level since January – potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten. We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates."
Earlier this week, the Commerce Department said April housing starts fell 30.2%, the biggest on record, to a seasonally-adjusted rate of 891.000 units, the lowest in five years. Building permits, meanwhile, slumped 20.8% to a five year low of just over 1 million units.