It’s Official: Refis on the Rise

The current low mortgage interest rate environment has homeowners scrambling to refinance their mortgages. But you probably already knew that.

Just look at the most recent data from the Mortgage Bankers Association. The MBA Weekly Applications Survey Refinance Index hit its highest level since July 2016; the refinance share of applications, at nearly 63 percent, reached its highest level since September 2016.

“Lenders may be approaching capacity constraints as they continue to deal with the largest wave of refinance activity in three years,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.

Data from Ellie Mae, Pleasanton, Calif., confirms the trend. The company’s July Origination Insight Report said the 30-year note rate dropped for the seventh straight month to 4.18 percent, down from 4.40 percent in June. Ellie Mae CEO Jonathan Corr said this “dramatic” drop in interest rates month-over-month has led to a significant increase in refinances. In July, Ellie Mae reported refinances accounted for 38 percent of all loans, up from 31 percent the month prior. Purchase percentages dropped to 62 percent of all loans, down from 69 percent in June.

“Shrewd homeowners are locking in lower interest rates, which has driven the spike in refinance activity in July,” Corr said. “And with the Federal Reserve cutting rates further, we expect to see continued activity as homebuyers are able to stretch their dollar and enter the market.”

Ellie Mae reported closing rates also hit a new high, at 77.0 percent, up from 76.8 percent in June. Closing rates on purchases increased to 79.3 percent in July, up from 78.8 percent in June, while closing rates on refinances dropped slightly to 72.9 percent in July, down from 73.4 percent the month prior.

Other report data:

–Time to close all loans held steady at 42 days in July. The time to close a refinance loan increased to 40 days, up from 38 the month prior, while the time to close a purchase loan dropped from 45 days in June to 43 days in July.

–The percentage of adjustable-rate mortgages decreased to 5.7 percent, down from 6.3 percent in June.

–Average FICO scores held at 731 for the second consecutive month.