In the latest twist of the housing market saga, veterans are stepping up to the plate, driving a surge in refinancing activity as mortgage rates climb. The Mortgage Bankers Association (MBA) has shed light on this trend, highlighting the resilience of VA-supported home loans amidst a backdrop of escalating borrowing costs.
For the week ending April 5, mortgage applications saw a marginal uptick of 0.1 percent, primarily fueled by a remarkable surge in refinancing endeavors. The MBA's Refinance Index soared by 10 percent from the previous week and showed a 4 percent increase compared to the same period last year. Conversely, the Purchase Index experienced a 5 percent dip from the prior week.
The VA share of total mortgage applications rose to 14 percent, up from 12.1 percent the previous week, indicating a notable preference for VA-backed loans amidst the current lending landscape.
MBA President and CEO Bob Broeksmit emphasized the impact of rising mortgage rates on borrower demand, stating, "Mortgage rates climbed above 7 percent last week as the financial markets responded to better-than-expected March employment data."
Despite the challenging environment, VA mortgages have emerged as a stabilizing force in the housing market. MBA's deputy chief economist Joel Kan noted, "Purchase applications were down almost five percent to the lowest level since the end of February, but refinance applications were up 10 percent, driven particularly by VA refinance applications."
The allure of VA home loans lies in their government-backed nature, which often translates to more competitive interest rates for eligible veterans and service members. Chris Birk, vice president of Mortgage Insight for Veterans United Home Loans, highlighted the favorable terms associated with VA loans compared to conventional mortgages.
As of April 11, VA loan rates remained comparatively lower, with the 30-year fixed VA loan purchase rate at about 6.4 percent and the 30-year fixed VA refinance loan at 6.5 percent.
The broader mortgage market has been grappling with rising rates since the Federal Reserve initiated rate hikes in March 2022. Despite holding rates steady since July, concerns over persistent inflation have kept borrowing costs elevated.
Freddie Mac's average 30-year mortgage rate crept closer to 7 percent, with chief economist Sam Khater attributing the increase to market reactions to recent economic indicators on jobs and inflation.
While inflation data has shown minimal movement, the economic narrative remains uncertain, reminiscent of expectations surrounding a recession from a year ago.
As veterans take the lead in refinancing their homes amidst rising rates, the housing market continues to adapt to evolving economic conditions, with VA loans serving as a beacon of stability for borrowers in search of favorable terms.
For more updates on the housing market and financial trends, stay tuned to KreditSanta.