Home Purchase Activity Increases as Rates Drop

Mortgage Weekly Update

Mortgage rates finally dropped back below 3% last week, according to Freddie Mac, and homebuyers responded. Total purchase loan applications were up 2% for the week.

“Purchase applications increased for the second time in three weeks, rebounding after a rather weak April with mostly weekly declines,” said Joel Kan, associate vice president of economic and industry forecasting at the Mortgage Bankers Association. “While purchase activity was around 4% lower than a year ago, the comparison is to last spring’s large upswing in activity as pandemic-related lockdowns lifted. Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices.”  

Refinances, on the other hand, decreased, falling 7% compared to the week prior. According to MBA’s data, refinance applications accounted for 61.4% of all mortgage activity, down from 63.3% previously.

If rates continue dropping, refinances could make a turnaround.

“Mortgage rates are down below three percent, continuing to offer many homeowners the potential to refinance and increase their monthly cash flow,” said Sam Khater, Freddie Mac’s chief economist. “In fact, homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 dollars annually. Substantial opportunity continues to exist today, as nearly $2 trillion in conforming mortgages have the ability to refinance and reduce their interest rate by at least half a percentage point.”

More in mortgage and housing news

  • The share of mortgage loans in forbearance fell to 4.19% this week, according to MBA. About 2.1 million homeowners are still on a forbearance plan.
  • Four House representatives introduced a bill this week that would offer 100% financing for first responders and teachers. Borrowers would pay only an upfront mortgage insurance premium of 3.6%, which could be rolled into the loan amount. Dubbed the “Homes for Every Local Protector, Educator, and Responder Act” (HELPER), the loan program would operate under FHA, but function more like a VA loan.
  • The Federal Housing Finance Agency released its quarterly House Price Index this week. According to the data, prices are up 12.6% compared to the first quarter of 2020 and 3.5% over the previous quarter. Prices also rose 1.4% between February and March.

This week in mortgage rates

Mortgage rates increased on some products and fell slightly on others.

Here’s how rates looked for each loan type:

Make sure to check back here next week for the latest mortgage news.

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By Aly Yale / May 28th, 2021 / Categories: / Tags:

Aly Yale

Aly J. Yale is a freelance writer focusing on real estate, mortgage, and the housing market. Her work has been featured in Forbes, Bankrate, The Motley Fool, Business Insider, The Balance, and more. Prior to freelancing, she served as an editor and reporter for The Dallas Morning News. She graduated from Texas Christian University's Bob Schieffer College of Communication with a major in radio-TV-film and news-editorial journalism. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.