Despite wider-than-usual daily swings last week, mortgage rates dropped to the lowest level ever in the Mortgage Bankers Association's 30-year-old weekly survey, causing yet another rush to refinance.
Total mortgage application volume rose 7.3% last week from the previous week, according to the MBA's seasonally adjusted index.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $510,400 or less decreased to 3.45% from 3.49%. That's the lowest level since the MBA began its weekly applications survey in 1990. Points increased to 0.29 from 0.28, including origination fee, for loans with a 20% down payment. That is 99 basis lower than a year ago.
"The decline in rates — despite Treasury yields rising — is a sign that the mortgage-backed securities market is stabilizing and lenders are successfully working through their lending pipelines," said Joel Kan, an MBA economist.
That rock-bottom rate caused a 10% weekly surge in applications to refinance a home loan. Refinance volume was 192% higher than a year ago.
Low rates did little for homebuyers. Mortgage applications to purchase a home fell for the fifth straight week, down 2% from a week earlier and down a striking 35% from one year ago. The spring housing market started early and seems to have ended early because of the economic downturn and social distancing caused by the coronavirus outbreak. Purchase applications in the states hardest hit — New York, California and Washington — are about half that of a year ago.
"The purchase market is still expected to rebound, as long as the public health measures to reduce the pandemic's spread are successful and result in a broader recovery," Kan said.
Homebuyers are still out there, doing virtual tours and looking for bargains. Freddie Mac put out a cautiously optimistic report, predicting very strong home sales in 2021.
"Undoubtedly, the housing market is facing its greatest challenge in over a decade as our nation weathers this unprecedented economic event," said Sam Khater, Freddie Mac's chief economist. "Although the uncertainty of the crisis means forecasts of economic activity are more unclear than usual, we expect that most of the economic damage from the virus will be contained to the first half of the year."