Data shows that there are more refi applications. But LOs aren’t seeing a wave of turnover

As mortgage rates recorded their sharpest decline of the year last week after a disappointing jobs report, data showed demand for refinancing soared.

Despite what appears to be welcome news for lenders, which have been suffering from declining margins for two years, refinancing activity has yet to pick up much, LOs said. HousingWire.

“I was going through my newsletters to Realtors last week and telling them to pay attention to the headlines,” said Geoff Black, senior lender at Guild Mortgage. “It (refi application volume) is meaningful, but is it meaningful on a macro scale? Absolutely not.”

“Our group in Alabama did five [refis] this summer. Tampa Bay, Florida, did three. Tennessee did two,” said Troy Borkowski, Southeast regional manager American financial network. “There have been a few refinancings that have trickled in, but interest rates haven’t really affected any of that.”

Fannie Mae reported that dollar volume of refinance applications rose 32.8% in the week ending August 9 compared to the previous week, while total mortgage closing volume rose 22.5% week over week, according to Optimal Blue.

“The volume of purchase locks increased by 12.3% during the period and the increase in volume was led by a 63.5% increase in refi locks. An increase in the number of borrowers seeking rate- and term-based refis has reduced the share of this type of loan in refi volume from 42% to 63%,” said Jim Glennon, vice president of hedging and trading at Optimal Blue.

Yet refinancing activity was only responsible for 17% of total closing volume, data from Optimal Blue shows.

“Refinancing activity today is nowhere near the levels we saw during the COVID-era refi boom of 2020 and 2021. At the height of that boom, refinancings accounted for 60% of lock activity, while currently they account for 25%,” Glennon added. .

Kea Blevins, senior mortgage advisor at Atlantic Bay Mortgage Groupsees that interest in refinancing has increased among its customers, but many are taking a wait-and-see approach as interest rates remain volatile.

The main people refinancing are those who locked in rates above 7% from fall 2022 through spring of this year. This small group of homeowners includes those who want to withdraw money from their accumulated assets.

“Some homeowners take out cash to make upgrades to their homes because real estate is often your largest asset,” says Blevins. “And with the way house prices have gone up – especially in the last two, three, four years – you could have someone who may have only lived in that house for two years but has now built up enough equity to be able to use that . updates or debt consolidation, just to give themselves some breathing room and their budget with the higher costs of living we are all facing.

Conventional mortgage rates fell to the high 5s and low 6s in early August after a jobs report showed a spike in unemployment. But interest rates rose later in the week. As of Friday, the average interest rate for a 30-year conforming loan was 6.65% HousingWire‘s Mortgage Interest Center.

Most loan officers are optimistic about a refi boom when rates fall below 5%, as about 88% of Fannie Mae single-family mortgages have rates below 6%. But the increase that originators are hoping for may not look the same as 2020 and 2021, as home prices will pose a challenge for buyers.

“There could be a pre-refinancing window for buyers in the coming months [presidential] elections and the end of the year when interest rates drop. But I think it could be short-lived because then housing prices will rise,” Borkowski said.