Mortgages: watching refinancing as Americans await rate cuts

Higher-for-longer interest rates have been keeping the US mortgage market generally subdued this year. But recent data shows how occasional spikes of refinancing have broken that trend.

CEIC users can get granular insights into the US housing market and explore this phenomenon via the comprehensive dataset available from the Mortgage Bankers Association.

Mortgage loan applications, as measured by the MBA's market volume index, increased by 3.9% in the week of July 12, following two consecutive weekly declines. This was the steepest growth rate since early June and was entirely due to Americans refinancing their home loans, as the second and third panels of our chart sow.

"Refis" jumped 15.2% during the week in question. Meanwhile, mortgage loan applications for purchasing a home declined by 2.7% week on week.

The week through June 7 was also an interesting outlier. A 28% surge in refinancing pushed the market volume index up more than 15% (though unlike the most recent week, home purchase loan applications also rose).

Measuring the willingness of Americans to take out mortgage loans is of key importance to US economic performance as a whole, especially as the Federal Reserve prepares to cut rates.

Our second chart taps the MBA's data to show that the effective interest rate on a 30-year fixed rate mortgage stood at 7%, quite steady since February. 

Our final chart shows the average loan size was estimated at USD 364,600, and illustrates the ratio of refinancing loans to the average new purchase mortgage.

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