As mortgage rates remained at record lows last week, homebuyers rushed out to apply for a mortgage. Homebuyer mortgage applications have surged for five consecutive weeks due to pent-up demand from shelter-in-place orders in March and April as well as a demand for more living space as a result of the pandemic.
Purchase mortgage volume dropped 3% from last week’s high pace, but remains 18% higher than a year ago, the Mortgage Bankers Association reported Wednesday.
“One factor that may potentially crimp growth in the months ahead is that the release of pent-up demand from earlier this spring is clashing with the tight supply of new and existing homes on the market,” says Joel Kan, MBA’s chief economist. “Additional housing inventory is needed to give buyers more options and to keep home prices from rising too fast.”
Despite the low mortgage rates, applications for refinancings dropped 12% for the week. However, they are still 76% higher than the same week a year ago, the MBA index shows. Lenders reportedly are not offering their lowest rates to refinancers in order to keep up with the higher volume of traffic coming in from home buyer applicants, CNBC reports.
MBA reports that the average contract rate on a 30-year fixed mortgage last week was 3.3%.