Mortgage Applications Increase Due to Renewed Refinance Activity

By Kyle Chezum Updated on 6/15/2011

 

The Mortgage Bankers Association reported a huge jump in mortgage applications over the Memorial Holiday weekend, surprisingly driven by refinance activity rather than the expected spring home purchase surge that has not yet materialized.  Mortgage interest rates have dropped to yearly lows, paralleling the low rates last seen in the fall of 2010, and it seems homeowners are racing to refinance and take advantage of these low rates just as they did then.

Some economists had assumed that a decrease in mortgage rates wouldn't drive a new refinance spike due to the high number of homeowners who just refinanced a matter of months ago during the previous dip.  In other words, the assumption had been made that there were too few loans left that hadn't been recently refinanced to drive a mortgage application increase through refinancing.  This seems not to be the case.

Mortgage applications shot up 13% for the week than ended June 10, the mortgage Bankers Association reports, drawn in by impressively low rates.  At present, a 30 year fixed rate mortgage comes at an average rate of just 4.51%.

Mortgage Bankers Association Vice President Michael Fratantoni had positive things to say about the increase, but also pointed out that mortgage applications were still far lower than they have been in times of financial health.  "Coming off of the Memorial Day holiday, refinance application volume increased significantly, as borrowers jumped to lock in the lowest mortgage rates since last November. The volume of refinance applications still remains 28% below levels seen at that time, as borrowers with an incentive to refinance remain constrained from doing so by lack of equity in their homes."