Record low mortgage rates leading millions in U.S. to refinance

Oct. 7 (UPI) -- Mortgage rates in the United States have fallen to new lows and spurred a flurry of applications to refinance, an industry report said Wednesday.

The Mortgage Bankers Association said in its weekly report that interest rates for a 30-year fixed-rate mortgage fell to 3.01% last week. Moreover, refinancing applications rose 8% and are 50% higher than they were last year at this time.

"Mortgage rates declined across the board last week -- with most falling to record lows -- and borrowers responded," Joel Kan, MBA associate vice president of economic and industry forecasting, said in a statement. "The refinance index ... hit its highest level since mid-August."

The lower mortgage rates -- which have sunk to record levels multiple times in recent months -- have not corresponded, however, to a surge in applications from homebuyers.

While those applications are 21% higher year-to-year, they declined by 2% last week and are 4% off their level a month ago.

The Market Composite Index, which measures application volume, increased 4.6% on a seasonally adjusted basis, MBA said. On an unadjusted basis, it rose 5%.

Analysts said in the report the COVID-19 pandemic has both contributed to and taxed the housing market.

"There are signs that demand is waning at the entry-level portion of the market because of supply and affordability hurdles, as well as the adverse economic impact the pandemic is having on hourly workers and low-and moderate-income households," Kan noted.

"As a result, the lower price tiers are seeing slower growth, which is contributing to the rising trend in average loan balances."