Falling Mortgage Rates Spur Application Frenzy

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06/12/2019 | 04:48 pm

By Ben Eisen

Consumers are taking advantage of an unexpected decline in interest rates to buy homes and refinance their mortgages.

The volume of mortgage applications surged by 27% last week, according to a weekly survey released Wednesday by the Mortgage Bankers Association.

Much of the activity was spurred by falling rates, which pushed homeowners to trade higher-interest mortgages for lower-interest ones. Some 6.8 million borrowers stand to save at least 0.75 percentage point on a mortgage by refinancing, according to Black Knight Inc., a mortgage-data and technology firm.

Refinances were up 47% from the previous week, according to the Mortgage Bankers Association. Purchase applications were up 10% over the span, and many expect a continued boost in home sales as a result.

"I feel very good about the housing market," said Lawrence Yun, chief economist at the National Association of Realtors. "Inevitability, I believe that home sales, which have been down year-over-year for many consecutive months, will turn positive in the second half of this year."

Rates for 30-year fixed mortgages fell below 4% in recent weeks for their first time since 2017, and were most recently at 3.82%, according to a weekly average maintained by the government mortgage giant Freddie Mac. Mortgage rates typically track the yield on the benchmark 10-year Treasury note, which has flagged recently, as investors reconsider the current U.S. growth outlook.

For lenders, which were hit hard by rising rates last year, the reversal has been a welcome sign. The outlook for lenders' net profit margins turned positive for the first time in almost three years, according to a survey by Fannie Mae released Wednesday.

Write to Ben Eisen at ben.eisen@wsj.com

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