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A growing chorus of mortgage industry observers believe the final week of February might have been the last hurrah for sub-3% mortgage rates. And the proof is in the refi pudding.
With mortgage rates making their ascension, many late-to-the-game homeowners hopped on the chance to refinance their home loans and pushed refi volume to 68% of all closed loans in February, according to the latest originations report from ICE Mortgage Technology. That’s the highest refi volume the industry has seen in over a year, with conventional refi volume even hiking all the way up to 75% of closed loans.
Rates have been over 3.0% for much of the month of March, and reached a benchmark rate of 3.32% for the 30-year mortgage on Friday. While a 3% rate is still hovering near historic lows, anywhere from an eighth to a quarter percent turn in mortgage rates, up or down, can cause a borrower to wait out the market.
Mortgage applications dropped 2.2% for the week ending March 12. The refi index has fallen 26% from its peak in September, according to the Mortgage Bankers Association. Last week, the refi share decreased to 62.9% of total applications, down from 64.5% the week prior.
“Rates have jumped 36 basis points since the end of January, and last week refinance activity fell across all loan types,” said Joel Kan, the MBA’s associate vice president of industry surveys. “The purchase market helped offset the slump in refinances. Activity was up 5 percent from a year ago, as the recovering job market and demographic factors drive demand, despite ongoing supply and affordability constraints.”
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Continued high refi volume may give builders enough time to play catch up as the industry battles constant supply shortages and high building material costs. Homeowners are currently working with just four months of inventory, according to the U.S Census Bureau.
Speaking of playing catch-up, data from ICE Mortgage Technology – which owns Ellie Mae – also revealed that lenders may finally be clearing out their pipelines. The average time it takes lenders to close a loan dropped to 53 days in February, from 58 days the month prior. Still, borrowers are waiting an average of 7.5 weeks before they enter their new home, similar to what happened in October when rates were sitting closer to 2.8%.
So what kind of borrowers were actually closing on all those loans? According to ICE, the average FICO score on all closed loans rose to 753 in February, once again, the highest data point the report has recorded in over a year. LTV dropped down to 70 and DTI remained unchanged at 23/34.