Rates Retreat, Giving Refinances A Boost

Mortgage applications increased for a second week as rates retreated from 7%.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — increased by 7.1%, following the week prior’s 9.7% bump.

Adjusted purchase applications rose by 5%, while the unadjusted index was up 6% and 11% lower YOY. 

“Mortgage rates dropped below 7% last week for most loan types because of incoming economic data showing a weaker service sector and a less robust job market, with an increase in the unemployment rate and downward revisions to job growth in prior months,” said Mike Fratantoni, MBA’s SVP and Chief Economist. 

Nonfarm payrolls rose by 275,000 in February while the jobless rate increased to 3.9%. This bashed Wall Street predictions, which had set new jobs at 198,000 and unemployment at 3.7%.

Liz Ann Sonders, chief investment strategist at Charles Schwab, called the report “mixed” and said it offers “a data point for every view on the spectrum… from the economy is plunging into a recession to Goldilocks, everything is fine, nothing to see here.”

The data is not expected to change the Fed’s game plan, with analysts still expecting rate cuts at some point later in the year.

Fratantoni noted that refinance activity served as a major player in the numbers last week, up by 12% overall with a 24% surge in government refis particularly.

Refis accounted for 31.6% of applications, an increase, but they remain historically low thanks to the super-low rates many homeowners locked in during the pandemic. In the past decade, they averaged 58% of all activity.

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