The race to refinance or buy a home slowed a bit last week as interest rates ticked up over uncertainty about the economic impact of the coronavirus pandemic.
Mortgage applications dropped 8.4% as compared to a week earlier, according to the latest survey from the Mortgage Bankers Association. Applications to refinance dropped 10%.
“The ongoing situation around the coronavirus led to further stress in the financial markets late last week, with unprecedented volatility,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting said in a statement. “This drove mortgage rates back up to their highest levels since mid-February.”
But, not counting a spike that occurred two weeks ago, the number of people seeking mortgages was still the highest it’s been since October 2012, with refinancing representing nearly 75% of all applications, Kan said.
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Interest rates fell steadily in recent weeks as investors shifted to bonds to find a safe haven amid the global health crisis sparked by COVID-19. But last week, they began to rise as lenders attempted to slow the flow of applications.
The average rate for a 30-year-fixed mortgage for a loan no greater than $510,400 was 3.74%, up from 3.47 the prior week, the MBA says.
Rates may reverse again. The Federal Reserve’s move to cut borrowing costs to near zero on Sunday to help calm financial markets, could eventually lead to lower borrowing costs.
“The Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing,” Kan said. “Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy.”