“Although the pace of job growth slowed in August, purchase volume continues to run strong at 7 percent above last year at this time. This strength is broad based, with growth at both the high and low ends of the market,” said Mike Fratantoni, chief economist for the MBA.
Annual growth in purchase volume had been in the double digits earlier this year, but that margin has been shrinking lately, as home shoppers find fewer and fewer homes available for sale. Low mortgage rates, which have been juicing refinances all summer, do not have as dramatic an impact on home sales, especially since fast-rising prices are negating any potential savings from lower rates.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.68 percent from 3.67 percent, with points increasing to 0.37 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio loans.
Closed mortgage volume did post strong gains in the second quarter of this year, according to new data from Black Knight Financial Services. Lenders originated $518 billion in first-lien mortgage originations in the second quarter, the highest volume since the same quarter of 2013. Purchase growth was helped by a strong spring buying season, and refinances saw gains as well, but they were not as high as some expected.
“While purchase originations jumped more than 50 percent from Q1, refinances saw only an eight percent increase over that period, and were actually down from the same time last year, despite the number of potential refinance candidates outpacing 2015 by over one million in every month since March,” said Ben Graboske, vice president at Black Knight Data & Analytics. “That said, refinance lending has risen for three consecutive quarters and accounted for $221 billion in originations in Q2.”
Interest rates did have the potential to move much higher after the release last Friday of the weaker-than-expected August employment report. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury bond, which slipped slightly after the report was released but were heading higher by the end of the day.