Refinancings Push Mortgage Applications Higher

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By Diana Olick | @diana_olick

Mortgage rates didn't move at all last week, but more borrowers made applications to refinance their home loans.

A weekly measure of loan volume by the Mortgage Bankers Association showed a 2.4 percent gain in total applications week-to-week, with a 4 percent jump in refinances leading the charge.

Refinancing has been languishing for more than a year, after rates jumped a full percentage point in the spring of 2013. Refinance application volume is still down over 40 percent from a year ago, despite slightly lower rates currently.

Loan applications to purchase a home are still languishing, up just 0.3 percent week-to-week, on a seasonally adjusted basis, according to the MBA. They are down 15 percent from a year ago. This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33 percent. The refinance share of mortgage activity increased to 54.4 percent of total applications, the highest level since March 2014.

The mortgage numbers seem to run counter to the latest readings from the housing market. Sales of existing homes rose 2.6 percent in June from May, according to a report released Tuesday by the National Association of Realtors. Sales of newly built homes have also seen gains. The June reading from the home builders is set to be released Thursday morning.

The answer to this disconnect between sales and mortgage volume likely lies in the still high percentage of home buyers using all-cash in transactions. One third of June buyers closed their deals with cash, which the Realtors' chief economist Lawrence Yun deemed, "amazing" in a press conference Tuesday. Others say this simply proves the disconnect in the market today between the "haves" and the "have-nots."

"There is the regular market where people need to make money in a job and get a mortgage," said Nela Richardson, chief economist at Redfin, a real estate brokerage. These, she says, aren't the ones driving the market.

June home sales rose most at the highest end of the market, in homes priced above $750,000. Sales of homes priced below $100,000 fell by nearly 9 percent from a year ago.

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