Formerly sidelined buyers are raring to go as mortgage rates continue to fall and home-showing restrictions are eased. During the week ending May 29th, mortgage applications to purchase a home shot up 18 percent over the same period last year and five percent from the week prior, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted Purchase Index.
“The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Last week, Freddie Mac reported that mortgage rates had plunged to an all-time low, hitting 3.15 percent for the average 30-year fixed-rate loan. Compare that to one year ago, when mortgage rates clocked in at 3.99 percent. Buyers have more purchasing power than ever, allowing them to afford higher-priced homes while keeping monthly payments reasonable.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less sank to 3.37 percent from 3.42 percent. Meantime, points decreased to 0.30 from 0.33, including the origination fee, for loans with a 20 percent down payment.
Mortgage applications could be even higher this week, as the record-shattering 3.15 percent rate wasn’t announced until Thursday, May 28th. Despite the bounce-back in buyer demand, Kan warns that it could be a temporary phenomenon.
“There are still many households affected by the widespread job losses and current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months.”