Tag Archives: refinancing

Pandemic led to U.S. housing boom, reduced credit card debt, New York Fed says

By Jonnelle Marte

(Reuters) – The coronavirus pandemic changed the way U.S. consumers use credit, as lower interest rates spurred a boom in home buying and refinancing and virus-related shutdowns led to a drop in credit card use and an increase in paying off debt, according to a report released on Wednesday by the New York Federal Reserve.

Total household debt last year increased by $414 billion to $14.56 trillion at the end of December, the New York Fed found in its quarterly household debt and credit report.

“The COVID pandemic and ensuing recession have marked an end to the dynamics in household borrowing that have characterized the expansion since the Great Recession, which included robust growth in auto and student loans, while mortgage and credit card balances grew more slowly,” New York Fed researchers wrote in a supplemental blog post published on Wednesday. “As the pandemic took hold, these dynamics were altered.”

Mortgage balances, which make up the largest share of household debt, grew by $182 billion in 2020 – the largest increase since 2007.

Home buying and refinancing took off last year after the Federal Reserve slashed its key overnight interest rate to near zero to fight the economic fallout from the pandemic, leading to lower mortgage rates. A massive shift to working and learning from home also bolstered the housing market, as some families searched for properties with more living space.

Credit card balances increased by $12 billion in the fourth quarter but balances were still $108 billion lower from a year earlier – the largest yearly decline since the report was launched in 1999.

The year-over-year drop is a sign that many credit card holders reduced spending and used pandemic relief checks to pay down their card balances, researchers said. That is in line with earlier research from the New York Fed that found 35% of direct payments received last year were used to pay down debt.

Meanwhile, auto loan balances increased by $14 billion during the fourth quarter and student loan balances rose by $9 billion, the New York Fed’s latest report showed. In total, all household debt not related to housing – including credit card debt, auto loans, student loans, and other debts – increased by $37 billion during the fourth quarter but was still below pre-pandemic levels seen at the end of 2019.

(Reporting by Jonnelle Marte; Editing by Paul Simao)

U.S. 30-year, 15-year mortgage rates fall to lowest since Nov 2016: Freddie Mac

FILE PHOTO: A home is seen in the Penn Estates development where most of the homeowners are underwater on their mortgages in East Straudsburg, Pennsylvania, U.S., June 20, 2018. Picture taken June 20, 2018. REUTERS/Mike Segar

(Reuters) – Borrowing costs on U.S. 30-year and 15-year fixed-rate mortgages fell to their lowest levels since November 2016, in line with the recent decline in bond yields because of trade and recession fears, Freddie Mac said on Thursday.

Last week, the yields on 10-year Treasury notes briefly dipped below those on two-year notes <US2US10=TWEB> for first time in a dozen years. The “curve inversion” among these two debt maturities has often preceded prior U.S. recessions.

This market phenomenon touched off a fresh wave of buying in U.S. Treasuries, sending 30-year yields <US30YT=RR> to record lows.

The decline in mortgage rates is expected to help home sales and to stoke refinancing, putting more cash into consumers’ pockets, analysts said.

“The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity,” Freddie Mac’s Chief Economist Sam Khater said in a statement.

The interest rates on 30-year mortgages averaged 3.55% in the week ended Aug. 22, down from 3.60% a week earlier and 4.51% a year ago, the mortgage finance agency said.

The average 15-year mortgage rate decreased to 3.03% in the latest week, down from 3.05% the week before. It was 3.98% a year ago.

Interest rates on five-year adjustable-rate home loans averaged 3.32%, the lowest since November 2017.

(Reporting by Richard Leong; Editing by Chizu Nomiyama and Nick Zieminski)

U.S. mortgage applications jump to highest since September 2016: MBA

FILE PHOTO: A "For Sale" sign is seen outside a home in Cardiff, California February 22, 2016. REUTERS/Mike Blake

By Richard Leong

(Reuters) – U.S. mortgage applications jumped to their highest level in more than 2-1/2 years last week, led by a surge in refinancing activity, as some home borrowing costs tumbled to their cheapest level since September 2017, the Mortgage Bankers Association said on Wednesday.

The Washington-based group’s seasonally adjusted index on loan requests, both to buy a home and to refinance one, increased by 26.8% to 529.8 in the week ended June 7, which was the highest since September 2016.

Interest rates on 30-year fixed-rate “conforming” mortgages, or loans whose balances are $484,350 or less, decreased to 4.12%, the lowest level since September 2017. The previous week they averaged 4.23%.

Mortgage rates have fallen in step with declining bond yields as investors poured money into low-risk U.S. Treasuries due to signs of a softening jobs market and worries about trade tensions between China and other trading partners.

“Despite the less positive outlook, both purchase and refinance applications surged, driven mainly by these lower rates,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a statement.

MBA’s barometer on refinancing activity jumped 46.5% from the prior week to 1,956.5, a level not seen since November 2016.

The refinance share of total mortgage applications expanded to 49.8% from 42.2% the prior week.

The group’s gauge on applications for home purchases, which is seen as a proxy on future housing activity, grew by 10% to 278.4, the highest level since the week of April 12.

Despite the increase, domestic home sales have been limited by tight supply and rising economic worries among potential home buyers, Kan said.

(Reporting by Richard Leong; Editing by Leslie Adler)

U.S. mortgage requests rise as loan rates hold near 10-month low: MBA

A view of single family homes for sale in San Marcos, California October 25, 2013. PROPERTY REUTERS/Mike Blake

(Reuters) – U.S. mortgage applications increased for the first time in five weeks as most home borrowing costs hovered near their lowest in 10 months, the Mortgage Bankers Association said on Wednesday.

The Washington-based industry group said its seasonally adjusted gauge of loan requests to buy a home and to refinance one rose 3.6 percent to 365.3 in the week ended Feb. 15. The prior week’s reading was the lowest in a month.

“Mortgage rates held steady on mixed economic news, as core inflation remained firm, while retail sales in December were much weaker than expected. However, overall application activity picked up over the week,” Joel Kan, MBA’s associate vice president of industry surveys and forecasts, said in a statement.

Interest rates on 30-year fixed-rate mortgages with conforming loan balances of $484,350 or less ticked up to 4.66 percent from the prior week’s 4.65 percent, which was the lowest since March 2, 2018.

U.S. Treasury yields, which are benchmarks for most mortgages, rose last week as underlying inflation trends remained intact and traders reduced their safe-haven bond holdings on optimism that China and the United States would resolve their trade conflict.

The other mortgage rates that MBA tracks were unchanged to 8 basis points higher on the week.

“Most rates remained close to 10-month lows, which allowed some borrowers with an incentive to refinance to capitalize,” Kan said.

The group’s seasonally adjusted barometer on home refinancing requests rose 6.4 percent to 1,084.4.

The refinance share of total mortgage applications was 41.7 percent last week, compared with 41.8 percent the prior week.

MBA’s seasonally adjusted gauge on applications to buy a home, which is seen as a proxy on future housing activity, climbed 1.7 percent at 232.7 last week.

(Reporting by Richard Leong in New York; Editing by Jeffrey Benkoe)