Incentive continues to weaken as rates soar
Fannie Mae reported little change in its weekly Refinance Application-Level Index (RALI) as the housing market continues to slow under the combined weight of rising inflation and interest rates.
The dollar volume of refinance applications for the week ending July 01 inched up 0.3% from the previous week, but chief economist Doug Duncan found that applications “did not rebound meaningfully” despite the holiday-driven contraction during the Juneteenth holiday the week before. Year over year, the RALI dollar volume was down 72.2%.
“With mortgage rates having moved sharply higher this year, the share of outstanding loans with incentive to refinance has declined significantly, reducing the overall level of refinancing activity,” Duncan said.
Fannie’s RALI count, a refinance loan count measure, increased 0.8% week over week but was down 71.6% year over year.
The Mortgage Bankers Association’s latest report also showed a 5.4% decline in overall mortgage application volume during the week. MBA’s refinance index fell 8% and the purchase index dropped 4%.
Read more: Mortgage applications slide down in weekly survey
“Rates are still significantly higher than they were a year ago, which is why applications for home purchases and refinances remain depressed,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Purchase activity is hamstrung by ongoing affordability challenges and low inventory, and homeowners still have reduced incentive to apply for a refinance.”
