Table of Contents
- Demand for mortgages slow down, but applications are still high in comparison to the same period in 2018
- Mortgage refinance applications dropped 7%, but they are still 135% higher than this time last year
- The growing number of refinancing is due to a result of low mortgage interest rates
It seems like the demand for mortgages is cooling off as the holiday season approaches. However, this is the norm, especially this time of the year when home sales usually slow down. There were concerns recently regarding the declining approval of new mortgages in the UK. But mortgage refinancing continues to surge as borrowers take advantage of low rates.
Contents
Demand for mortgages slows down
Although the demand for mortgages has slowed down, it is nonetheless higher relative to last year. It has mainly been because of the low mortgage rates that consumers are enjoying this year. Interestingly, the number of mortgages refinances is around two and a half times the numbers witnessed last year. Homeowners have realized that they can save cash on their mortgages through refinancing even those taken out in 2018. As a result, this has led to an increase in applications for mortgage refinancing.
According to the seasonally adjusted index of the Mortgage Bankers Association, mortgage applications dropped 5% last week. However, when compared to the same week’s volume in 2018, when rates were higher, the number was up by 65%. Most of the mortgage applications were from refinancing accounting for 62.2% of total applications.
Demand for mortgage refinancing high
The applications for refinancing mortgages declined 7%, but the figure was still higher than last year. Refinance applications were 135% higher in comparison to the same period last year. It is because currently, rates are almost a percentage point lower than they were last year.
Demand for the refinancing of mortgages has been growing since last spring when interest rates started falling. As a result, consumers are lowering their monthly payments. Equally, they have been taking cash out of homes in the current equity-rich market.
The current home mortgage rates are the lowest they have been in the last seven years, according to MoneyWise.com. Mortgage Bankers Association’s Mike Fratantoni states that purchase and refinancing activity slowed down the previous week despite no changes in rates. He adds that as the holiday season approaches, purchase applications have slowed down. Applications for home purchases dropped 2% last week, but they were around 10% up from last year.
Mortgage rates will stay low in 2020
However, a Freddie Mac survey indicates that there was a slight increase in rates last week. The report shows that 30-year-fixed rate loans increase to 3.73% while the 15-year-fixed rate mortgages were up to 3.19%. The 15-year-fixed-rate mortgages are popular among consumers seeking to refinance.
Fratantoni indicates that 2020 will be a good year for homeowners because rates for mortgages will stay low. As a result, those seeking to buy houses will find more houses to purchase. He adds that the tide is turning for home buyers. Last month housing starts and permits increased significantly as the confidence of home builders surged to new levels in two decades.
Rebecca White is chief editor at CreditRaters.com. Rebecca has an extensive amount of knowledge on financial subjects including short-term loans & debt consolidation in the UK and USA. Rebecca has wrote for many publishers such as Debt Secret, My Money, VL and more.