U.S. mortgage rates fell to a fresh all-time low last week, an industry lobby group said Wednesday, but refinancing activity slumped, and purchases fell, amid a backlog of applications and record-high housing prices.
The MBA's refinancing index fell 6.5% to 3,346.9 points, but still remains 52% higher than last year. while mortgage applications fell 4.7% for the week ending September 25. The seasonally-adjusted Purchase Index, which tracks mortgage applications for the purchase of a single family home, fell 1.9% to 320.9 points.
“Despite the decline in rates, refinances fell over 6%, driven by a 9% drop in conventional refinance applications,” said said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week’s decline in refinances. Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept.”
“Purchase applications also decreased last week, but activity was still at a strong year-over-year growth rate of 22%," he added. "Even as pent-up demand from earlier in the year wanes, there continues to be action in the higher price tiers, with the average loan balance remaining close to an all-time survey high.”
Last week, data from the Commerce Department showed that new home sales in the United States jumped to a fourteen-year high, while the median sale price of a new home sold in August was pegged at $312,800, the Department said, down 4.3% from last year.
That reading followed similar figures from the National Association of Realtors, which said existing home sales surged the most in nearly 15 years last month while median prices hit an all-time high and sale times narrowed as housing continues to pace the nation's economic recovery.
Housing has remained one of the few consistent bright spots for an American economy hit by a wave of unemployment, and slower consumer spending, brought on by the coronavirus pandemic.
However, decisive action from the Federal Reserve, in the form of record-low interest rates and the purchase of billions worth of mortgage-backed securities, has helped keep the housing market ticking amid what many suggest could be a generation-defining change in the way people live and work in the world's biggest economy.
U.S. 30-year mortgage rates hit a record low of 2.86% earlier this month, according to Freddie Mac data, igniting "robust purchase demand activity, which is up twenty-five percent from a year ago and has been growing at double digit rates for four consecutive months", according to chief economist Sam Khater.