The consistently low interest rates of the last few months have driven an increase in mortgage refinances, according to the latest Origination Insight Report from Ellie Mae.
For the month of October, refinances made up 40% of the total mortgage originations, which marked a six-month high. That’s up from 36% in September. The share of refinances was as low as 32% in July.
October’s jump in refinances reverses a trend that saw the share of refinances fall throughout 2014. In January, for example, the share of refinances was 47%.
For conventional loans closed in October, the share of refinances was 49%, rising to the highest level since February.
“Refinancing activity in October was at the highest level since March of this year, thanks largely to the current interest rate environment," said Jonathan Corr, president and COO of Ellie Mae. "Low rates are creating opportunities for homeowners to either lower their payments or capitalize on their homes’ equity.”
According to Freddie Mac’s latest Primary Mortgage Market Survey, the interest rate for the 30-year, fixed-rate mortgage fell back below 4% for the week that ended Nov. 20, coming in at 3.99%.
By comparison, the 30-year, FRM was 4.22% at this time last year.
According to Ellie Mae’s report, which is derived from a “robust sampling of approximately 57% of all mortgage applications that were initiated on the Encompass origination platform” during a given month, the average 30-year interest rate for all loans fell for the sixth consecutive month to 4.371%, the lowest average since July 2013.
Per Ellie Mae’s report, the 30-year interest rate was 4.75% one year ago.
Ellie Mae also reported that closing rates for purchase loans rose to 66.1%, the highest percentage since Ellie Mae began tracking this data in August 2011.
Despite the increase in refinances, the average time to close a refinance actually dropped from 40 days to 39 days.
Additionally, Ellie Mae’s report also stated that 33% of closed loans in October had an average FICO score of less than 700 compared to 28% in October 2013.