(Reuters) - A flurry of U.S. refinancing applications sparked by a one-year low for mortgage rates could provide a much-needed boost for mortgage providers, according to the Mortgage Bankers Association.
The trade group said on Wednesday mortgage applications jumped 9 percent this week as unexpected growth in refinancing applications outpaced growth in new loans. Since late December the group’s Refinance Index has surged 76 percent, reaching its highest level in more than a year.
“For the industry in general the pickup in (refinancing) has been a nice surprise,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, told Reuters.
The uptick in refinance applications has led the MBA to increase its originations outlook twice this year. The group originally forecast the metric to be slightly lower in 2019 after a 4 percent drop in 2018. But it reversed its outlook in March to predict 1 percent growth for the year.
Refinancing still remains well below historic highs after falling to an 18-year low last year, when mortgage rates rose above 5 percent. Refinancing made up about 28 percent of mortgage originations in 2018, down from a peak of 75 percent in 2012, according to seasonally adjusted data from the MBA.
The average interest rate for a 30-year fixed rate mortgage this week hit a fresh low for the year at 4.45 percent. Last week, the U.S. Federal Reserve signaled it would not raise interest rates this year. Other standard interest rates, including the 15-year fixed mortgage rate, were also lower this week.
Though the bulk of refinancing activity is still likely in the rear view, Kan says the new low rates will give an opportunity to homeowners who missed out in the past because they didn’t have enough equity or a strong enough credit position.
“There aren’t many borrowers left out there with rates high enough to take advantage of this,” he said. “We are going to see some come back, but its not going to be a big boom.”
Reporting by Imani Moise; Editing by Paul Simao