On Wednesday, the Mortgage Bankers
Association reported that mortgage
applications plunged 29.4% last week. People
trying to sell homes have cancelled showings
during the outbreak and because closings
are done in person, economists expect
sales will decline sharply. But the virus has
affected the market in other, unforeseen ways
as well.
Despite additional cuts to benchmark interest
rates by the U.S. Federal Reserve, mortgage rates
have actually been rising.
Joel Kan, MBA’s Associate Vice President of
Economic and Industry Forecasting, said that’s
partially because lenders amid the outbreak are
wrestling with capacity issues, backlogs in the
pipeline, and the challenge of working remotely
in real estate.
“Home purchase applications were notably
impacted by rising rates and the widespread
economic disruption and uncertainty over
household employment and incomes,” Kan
wrote. “Last week’s purchase index fell 15% to its
lowest level since August 2019.”
While mortgage applications fall, refinancing,
which can be done from home, is soaring.
Lending Tree says the economic effects of the
virus outbreak have led to unprecedented
volatility in mortgage interest rates and an
overwhelming surge of borrower demand.
The company’s data shows that refinance
mortgage applications through its marketplace
tripled from a year ago in each of the 50
largest cities and in all but five states. In
San Francisco, refinance loan requests
skyrocketed 417%.