NEW YORK–Should credit unions be preparing for a new wave of mortgage refinancings?
Mortgage applications surged 17% last week, driven by homeowners seeking to refinance, up by a whopping 35%, according to new data from the Mortgage Bankers Association.
The surge came as the average rate on the standard 30-year, fixed-rate mortgage last week was 6.49%, which was actually up slightly from one week earlier.
“But that’s still well below this year’s peak and the two-decade high last fall — and that appears to be enough to entice homeowners to refinance,” CNN reported. “And borrowing costs are expected to fall even further later this year if the Federal Reserve delivers on the interest rate cuts widely expected by economists and investors.”
‘A Lot of Challenges’
Mortgage volume might be even stronger were it not for another factor: home prices continue to rise in many markets and have made home ownership unaffordable for many. Home prices have also been a big driver of inflation.
“Housing has a lot of challenges ahead of it, not the least of which are high mortgage rates, high home prices and a lack of inventory,” Tom Porcelli, chief U.S. economist at PGIM Fixed Income, told CNN in an interview. “The average payment on a mortgage is still double from four years ago.”
One Hopeful Sign
A pick-up in residential construction in some markets, however, is being viewed as a hopeful sign home prices will moderate.
The Fed, which as credit unions understand, doesn’t set mortgage rates, but its actions on the federal funds rate does influence them. The rate-setting Federal Open Market Committee is next set to meet in September.