There is growing evidence that the recent decline in mortgage rates is prompting more borrowers to refinance.
In a July 2024 Market Advantage report released Monday, Mortgage Technology Inc. best blue Refinancing demand, measured as locked-in loan levels, grew to the highest level since September 2022, the report said.
Data comes from house lineThe Mortgage Rate Center shows that interest rates were on the rise in September 2022, with the average interest rate on a 30-year conventional loan at the end of the month being 6.88%. On Friday, the 30-year conventional rate averaged 6.72%, a 2024 low and well below a peak of 7.58% in early May.
this Fed It also affected the interest rate trend in the second half of 2022. Interest rates were raised three times in July, September and November of that year, each time by 75 basis points, followed by a 50 basis point increase in December. The Federal Reserve has not changed its benchmark interest rate since July 2023, but is widely expected to cut rates next month.
The refinance share of the mortgage market grew to 17% last month, up 81 basis points from June and 472 basis points (bps) higher than in July 2023, according to Optimal Blue. , while the interest rate-term refinancing volume increased by 12.3% compared with the previous quarter.
This is consistent with recent data Mortgage Bankers Association (MBA), whose seasonally adjusted refinancing index showed that refinancing applications increased 16% week-on-week and 59% year-over-year in the week ended August 2.
Lower interest rates are also having a positive impact on home loans, Optimal Blue reports. Lock-in purchases increased 2.5% from June to July, but fell 7% year-on-year. “This is a significant improvement from the 17% year-over-year decline in June and suggests that purchasing demand may be stabilizing as the market adjusts,” the report said.
Overall, the number of locked loans increased by 3.5% this month.
Optimal Blue also noted that “the loan mix shifted toward agent production in July.” Fannie Mae and Freddie Mac Market share increased to 56.1%, an increase of 18 basis points from June.
Government loans through federal housing administration (Federal Housing Administration) and U.S. Department of Veterans Affairs (VA) has also gained market share, currently accounting for approximately 31% of the market. But the market share of nonconforming loans, which includes jumbo loans and non-QM products, fell 107 basis points to 12.4%.
Credit quality remained stable in July, with the average credit score at 732, the same as in June. However, average loan amounts declined, “reflecting a shift in nonconforming loan types,” Optimal Blue explained. The average loan size was $369,000 in July, compared with $374,000 in June.
