U.S. Homebuyer Demand Spikes

After a brief pullback at the end of June, homebuyers south of the border rushed back into the mortgage market last week, taking advantage of record-low mortgage rates.

Information released Wednesday by the U.S. Mortgage Bankers Association showed mortgage applications to purchase a home rose 5% for the week and were a remarkable 33% higher than a year ago. The association's index was seasonally adjusted, including for the Fourth of July holiday.

Buyer demand has been incredibly strong since mid-May, after the coronavirus shut down most housing activity in April. The only thing standing in the way of more sales is the record low supply of homes for sale.

Home prices gains in the United States continue to accelerate, so low mortgage rates are giving buyers much-needed help. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of up to $510,400 dropped to 3.26% from 3.29%. Points, including the origination fee, for loans with a 20% down payment decreased to 0.35 from 0.36.

The index also showed applications to refinance a home loan, which are generally more sensitive to weekly interest rate moves, rose just 0.4% from the previous week but were 111% higher than one year ago. Because interest rates have been low and refinance demand has been strong for so long, only a limited number of borrowers can still benefit significantly from even the new record low rate.