Refinance Index climbs 15% week over week as borrowers find openings in a turbulent market
Mortgage rates continued to whipsaw last week amid continuing uncertainty about the Iran war – but mortgage shoppers still pushed ahead with their purchasing and refinancing plans as overall applications jumped.
New data from the Mortgage Bankers Association (MBA) showed that its Market Composite Index – which measures mortgage loan application volume – rose by 10.8% last week compared with a week prior, spurred by a big increase in refinance volume.
The Refinance Index was up 15% week over week and 20% from a year prior, the MBA said. The Purchase Index, meanwhile, rose by 7% compared with the previous week.
The news marks another positive development this week for the housing market after the National Association of Realtors (NAR) revealed yesterday that existing home sales climbed by 3.2% last month, hitting their highest level since December.
Borrowers still finding opportunity despite volatile environment
The latest uptick in mortgage applications arrived despite an increase in the average 30-year fixed rate to 6.60%, although MBA senior vice president and chief economist Mike Fratantoni said many borrowers had still been able to find deals in a turbulent market.
“Mortgage rates were volatile last week as news from the Middle East continues to drive markets,” he said in remarks accompanying Wednesday’s MBA release. “While the average rate was up slightly, with the 30-year fixed rate now at 6.60%, there were opportunities where borrowers were seeing somewhat lower rates.”
FHA loans took a greater share of total applications, rising slightly from 17.0% to 17.4% week over week, while the VA share of total applications was down (13.4%, compared with 14.4%). Refinances accounted for 40.2% of overall mortgage activity, up from 38% the week before, and the adjustable-rate mortgage share came in at 8.6% for the week.
What’s next for US mortgage rates?
The rate outlook for the months ahead remains unclear. Ten-year Treasury bond yields, which strongly impact mortgage rates, wobbled on Wednesday morning after President Trump appeared to suggest the prospect of a deal to end the war with Iran was fading.
Meanwhile, the latest consumer price index (CPI) update, also released on Wednesday morning, showed the inflation rate rose to 4.2% in May – its highest level for three years – as energy cost spikes continued to put upward pressure on prices.
While mortgage brokers aren’t convinced rates will slip back into the five-percent range, many believe the market won’t see a meaningful surge in activity until borrowing costs drop further.
“I really think the number is 5.99%,” Hunter Bolling, a Texas-based loan originator with HB Mortgage Team, told Mortgage Professional America in May.
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