Why Aren't Mortgage Applications Higher?

August 31, 2016

More borrowers took advantage of low mortgage rates last week but housing experts say mortgage applications should be much higher.

Total mortgage applications – including those for refinancings and home purchases – rose 2.8 percent on a seasonally adjusted basis compared to the previous week, the Mortgage Bankers Association reports. Most of that increase was due to an uptick in refinance applications, which increased 4 percent week-over-week.

“The last time [mortgage] rates were at these levels, the refi index was almost twice as high,” says Michael Fratantoni, MBA’s chief economist. “At these rate levels, there are borrowers who still stand to benefit, but there are many home owners who have already taken advantage of refinancing and are not yet incentivized to do it again.”

MBA reports the average 30-year fixed-rate mortgage held steady last week at 3.67 percent, still hovering near lows.

Meanwhile, applications last week for home purchases rose slightly by 1 percent and are 5 percent higher when compared to a year ago.

“The weak level indicates few home buyers in the market, likely due to the short supply of homes for sale and higher prices,” CNBC reports.

Mortgage applications have been slowing over the past few months.

"As the economy reaches full employment, the pace of job growth is slowing, and this will slow the growth in purchase activity as well, but we do continue to expect growth in home sales going forward," Fratantoni says.

Source: “Mortgage Applications Up 2.8% But Refinancing Applications Should Be Higher,” CNBC (Aug. 31, 2016)