Mortgage prepayments jumped 58% in July from a year ago as cheap rates drove refinancings, according to Black Knight. The prepay volume was up 26% from the prior month.
The lowest mortgage rates in almost three years are driving more Americans to refinance home loans. The average U.S. rate for a 30-year fixed mortgage fell to 3.6% in the first two weeks of August, the lowest level since November 2016, according to Freddie Mac.
“Keep in mind that 30-year rates didn’t drop into the 3.75% range until the end of June,” the company said in a statement. “Given a 30- to 45-day closing window, that means we’re just starting to see the manifestation of the increased refinance incentive we’ve been reporting on. As they say, stay tuned.”
The Mortgage Bankers Association’s Refinance Index during the first week of August rose to its highest level since July 2016. That put it 196% higher than the same time period in 2018, for the week ended Aug. 9.
Lower mortgage rates probably will boost loan originations 15% compared to last year, according to a forecast issued by MBA last week. Mortgage originations probably will total $1.86 trillion in 2019, MBA said. In 2018, mortgage volume was $1.64 trillion.
MBA also said it expected the refi share of originations to rise to 33% in 2019. That’s up from the 30% it projected last month. In 2018, the refi share was 28%.
The Black Knight report also showed the national delinquency rate was 3.46% in July. That was the lowest rate for July in records going back to 2000, the company said.
The states with the lowest delinquency rates were Colorado, Oregon, Washington, Idaho and California, according to Black Knight. The worst delinquency rates were in Mississippi, Louisiana, Alabama, West Virginia and Arkansas.