Bank volatility increases mortgage demand

The latest week saw a 2.9% increase in mortgage applications, according to the Mortgage Bankers Association.

According to the seasonally adjusted index from the Mortgage Bankers Association, the number of mortgage applications to buy a home fell by 6% last week compared to the week before. Volume is currently at a 28-year low and was 44% lower than the same week last year.

Martin Beck, chief economic advisor to the EY ITEM Club, says: “The latest household lending data indicated continued weakness in housing market activity, albeit with signs that the worst may be in the past. Mortgage approvals rose to 43,536 in February from 39,647 the previous month, the first increase since last August. But this was still well below the 62,677 per month averaged during 2022. Reflecting the lagged impact of the fall in approvals at the turn of 2022 and 2023, net mortgage lending also fell to £0.7bn, the lowest since April 2016, excluding the pandemic period.

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Home loan refinancing applications went up 5% for the week but were still 61% fewer than they were a year ago. Most current homeowners have mortgages with interest rates that are significantly lower than the current rate, so they have little motivation to refinance. Most people who want to borrow equity choose second loans rather than giving up their current interest rates on cash-out refinances.

Low inventory continues to be an issue on the supply side.

“Home-price growth has slowed markedly in many parts of the country, which has helped to improve buyers’ purchasing power,” said Joel Kan, an MBA economist in the release. “While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers responded, leading to a fourth straight increase in purchase applications.”

He added that while refinancing activity picked up last week, it’s wasn’t a big group. “Most homeowners still have rates significantly lower than current levels, leaving only a small pool of borrowers with an incentive to refinance,” Kan said.