Mortgage rates in the United States hit another record low last week, the 15th in 2020 and the second record in as many weeks.
According to cnbc.com, the drop, however, did not trigger any significant change in weekly mortgage applications, stressing that demand is substantially stronger than it was a year ago.
Mortgage Bankers Association’s seasonally adjusted index stated that total mortgage application volume increased by 1.1% week-to-week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.85% from 2.90%, with points decreasing to 0.33 from 0.35 (including the origination fee) for loans with a 20% down payment.
“U.S. Treasury rates stayed low last week, in part, due to uncertainty over the prospects of additional pandemic-related government stimulus and raised concerns about the continued rise in COVID-19 cases across the country,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Applications to refinance a home loan, which are most sensitive to mortgage rate fluctuations, increased 1% for the week but were a strong 105% higher than the same week one year ago.
About this period last year, mortgage rates were 113 basis points higher.
Refinancing now would give anyone who refinanced last year substantial savings on their monthly payments.
Mortgage applications to purchase a home increased by 2% for the week and were 26% higher annually.
December is not typically a strong month for home sales, but demand continues to surge as Americans continue to work from home. They want more space, and some now can work from anywhere, giving them far more options for relocation.
“Applications to buy a home increased for the fourth time in five weeks, as both conventional and government segments of the market saw gains,” said Kan.
“Government purchase applications rose for the sixth straight week to the highest level since June; perhaps a sign that more first-time buyers are entering the market.”
According to cnbc.com, first-time buyers have been up against strong competition for low supply at the entry-level of the market. Cash-heavy investors continue to pile in, and homebuilders are not building nearly enough low-priced homes to meet the demand.
Home prices at the low end are rising fastest, leaving some potential buyers on the sidelines.