The Federal Mortgage Bank of Nigeria (FMBN) has commended and promised to partner more with leading primary mortgage institution, Platinum Mortgage Bank Plc.
This was made known by the MD/CEO of FMBN, Ahmed Dangiwa on Monday when Platinum Mortgage Bank paid the bank a courtesy call at their headquarters in Abuja.
Speaking at the meeting, Dangiwa said that Platinum Mortgage Bank is one of their biggest partners and is one of the most performing primary mortgage banks in Nigeria.
Dangiwa who commended Platinum Mortgage Bank on their recent recapitalisation said that FMBN is willing to partner with them in the delivery of affordable home ownership in Nigeria.
‘’Platinum has been a very critical stakeholder to National Housing Fund and have created mortgage loans worth over N10 billion currently and it is still running, and they are all performing loans.
‘’Through Platinum Mortgage Bank, we are still committed to advance more facilities for home ownership. We are willing to partner with them to create an enabling environment for further synergy in the service delivery of home creation to Nigerians.
‘’We are happy to hear that they are being recapitalised to N7billion and are about to reach up to N10billion capitalisation. With this I think the bank should be able to come back again and do a lot of business with us. We wish to congratulate them on that and hope that they can even acquire smaller PMBs in order to have broader base. That is the only way to strengthen the market. There are a lot of PMBs that are not performing. These are the kind of PMBs they can absorb in order to strengthen their base,’’ he said.
In his response, the MD/CEO of Platinum Mortgage Bank, Emmanuel Mbaka said himself and the board of the bank were satisfied with the outcome of the meeting.
‘’We came here to interact with our biggest trading partner, the Federal Mortgage Bank of Nigeria. The chairman and all board members of Platinum Mortgage Bank came on fact finding and courtesy visit to the management and board of FMBN. They are our biggest partner in the area of loan creation which is the main focus of the bank.
Platinum Mortgage Bank is one of the leading mortgage banks in Nigeria and has as at today recapitalised to the sum of N7 billion, and its share capital is set to move up to N10 billion next year.
The average U.S. rate for a 30-year fixed mortgage fell to another three-year low this week, according to the latest Freddie Mac Primary Mortgage Market Survey.
According to the company’s data, the 30-year fixed-rate mortgage averaged 3.55% for the week ending August 22, 2019, down from last week’s rate of 3.6%. That’s almost a percentage point lower than its 2018 average of 4.53%.
Freddie Mac Chief Economist Sam Khater said the drop in mortgage rates continues to stimulate the real estate market and the economy.
“Home purchase demand is up 5% from a year ago and has noticeably strengthened since the early summer months, while refinances surged to their highest share in three and a half years,” Khater said. “Households that refinanced in the second quarter of 2019 will save an average of $1,700 a year, which is equivalent to about $140 each month.”
“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,” Khater said.
The 15-year FRM averaged 3.03% this week, retreating from last week’s 3.07%. This time last year, the 15-year FRM came in at 3.98%.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.32%, falling from last week’s rate of 3.35%. This rate sits much lower than the same week in 2018 when it averaged 3.82%.
The world’s headlong dash to zero or negative interest rates just passed another milestone: Homebuyers in Denmark effectively are being paid to take out 10-year mortgages.
Jyske Bank A/S, Denmark’s third-largest lender, announced in early August a mortgage rate of -0.5%, before fees. Nordea Bank Abp, meanwhile, is offering 30-year mortgages at annual interest of 0.5%, and 20-year loans at zero.
Years of easing by central banks hacked away at interest rates around the world, distorting the traditional economics of lending and borrowing. This is most pronounced in Europe, where a composite home-loan rate across the euro area fell to 1.65% in June, the lowest since records began in 2000.
While some regions have resisted the trend, borrowing costs are at or near rock-bottom in many major world markets. That’s boosted demand from homebuyers and spurred fierce competition among lenders for their business.
Here’s a snapshot of mortgage rates around the world:
The average American 30-year mortgage rate is 3.6%, the lowest since November 2016. A resulting surge in demand for homes sent total mortgage debt to $9.41 trillion in the second quarter, surpassing the peak reached during the 2008 financial crisis. Mortgage brokers, too, are rushing to keep up with demand for refinancing: Applications are running at a three-year high.
The benefits for home buyers are muted in cities such as New York and San Francisco, however, because the boom has led to a shortage of affordable homes.
French mortgage rates reached a trough of 1.39% on average in June, according to Bank of France data. The country’s banking industry is extremely competitive: Many lenders have jockeyed to lure customers with cheaper offers.
German mortgage rates also reached historic lows this year, with the average 10-year loan currently under 1%. Some lenders are offering rates around 0.5%, according to Interhyp, a comparison website.
The prospect of further declines in benchmark borrowing costs could drive many mortgage rates toward zero. This may have a limited impact on the residential market, however — only 46% of Germans are homeowners, compared with an EU average of 69%.
Mortgage rates in the U.K., by contrast, have been almost unchanged this year, despite a drop in overall borrowing costs amid a worsening economic outlook. The rate on a two-year fixed mortgage fell just 8 basis points from January to July, compared with a 38 basis-point drop in two-year swaps.
One reason for this, says Mark Gilbert of Bloomberg Opinion, is that the Bank of England’s regulatory arm has discouraged lenders from trying to win market share by easing standards because it’s concerned about their financial strength.
Mortgage costs are fairly high in Hungary because regulators steered almost all borrowers away from cheaper (but less secure) floating-rate loans. A 10-year fixed-rate mortgage is currently around 5%, compared with money-market rates near zero.
The attraction of security was heightened by memories of a fashion for mortgages taken out in Swiss francs before the financial crisis. The subsequent plunge in the forint against the franc hammered as many as 1 million Hungarians.
Mortgage rates have actually risen in Greece, burdened by sovereign and corporate debts. The average floating-rate home loan was 3.08% in June, an increase of 11 basis points from a year earlier.
Greek banks’ mountain of soured loans means they have become wary of extending new credit, even when secured by a house.
Mortgage rates are also climbing in Hong Kong as the political crisisweakens the appetite for loans. Both HSBC Holdings Plc and Standard Chartered Plc increased effective rates by 10 basis points to 2.48% in July, according to Bloomberg Intelligence.
DBS Group Holdings Ltd., Singapore’s largest bank, is offering a three-year fixed-rate mortgage at 1.89% in the first year, rising to 2.18% in the second and third years. Floating-rate loans are set at about 1.13% above deposit rates.
Loan-to-value limits for mortgages were tightened last year to prick an incipient property bubble. Residential home prices have been recovering as foreign buyers return to the market, with private home sales jumping to the highest level in eight months in July.
The Bank of Japan’s negative-rate policy has kept home loans affordable. A 10-year fixed-rate mortgage can be had for about 0.65%, and Sumitomo Mitsui Trust Bank offers a rate as low as 0.53%.
This has spurred property purchases, and prices, in the larger cities, helping reverse years of decline following the bursting of the market bubble in 1991. Residential land prices in the greater Tokyo area rose 1.3% last year, while those outside major urban areas increased 0.2%, the first rebound in 27 years. Nationwide, though, prices stand at just 38% of their 1991 levels, according to the Land Ministry.
Mortgage rates have fallen about 40 basis points following the Australian central bank’s back-to-back interest rate cuts in June and July. The average standard variable rate at the nation’s big four lenders is currently 4.94%.
The decline in mortgage rates, along with an easing of lending rules and the surprise re-election of the center-right government, has fired up Australia’s housing market. Following a two-year slide, property prices in Sydney have risen over the past two months.
The cost of a home loan remains relatively high in South Africa. Banks’ prime lending rate is about 10%, and mortgage borrowers can expect to pay anywhere from two percentage points below that rate to five points above it.
While banks are starting to extend more loans to compete for market share, mortgage rates are unlikely to drop much. Inflation is generally high, and the central bank has held its benchmark rate above 6% since 2015.
Nigeria has had double-digit inflation since 2016, with mortgage rates to match — as high as 30%. Those who contribute a small percentage of their income to the state-owned bank can get a much better 9% rate from the National Housing Fund.
Mortgage uptake is low because of high rates, low incomes and a long wait for government-backed loans.
The Federal Mortgage Bank of Nigeria (FMBN) has disbursed N2.6 billion to 3,034 beneficiaries under its intervention housing loan through the Federal Staff Housing Loan scheme, the Managing Director, Ahmed Dangiwa, has said.
Dangiwa said this in Abuja when Hannatu Fika,the Executive Secretary of Federal Government Staff Housing Loans Board, paid him a courtesy visit.
“As the federal government tries to provide cost effective and affordable housing for civil servants, it is pertinent to note that a total sum of N2.6 billion has so far been disbursed by the Federal Mortgage Bank of Nigeria to 3,034 beneficiaries through the Federal Staff Housing loan.
“I am also indeed very pleased with the remarkable results that we have been able to achieve in the Home Renovation Loan,” he said.
According to him, the Home Renovation Loan is one of several products of the bank aimed at ensuring contributors to the National Housing Fund benefit from the scheme.
He stated that the FMBN Home Renovation Loan was created for the purpose of renovating existing structures at six per cent for tenure of five years maximum.
Africa’s richest man and the President of the Dangote Group, Alhaji Aliko Dangote has called for the need to adopt proper mortgage financing and consumer credit in Nigeria.
According tohim, the availability of these is important in tackling corruption, alleviating the sufferings of people and reducing the hardship encountered by buyers when purchasing goods in the country.
Speakingduring a visit to the National Leader of the All Progressive congress (APC), Bola Ahmed Tinubu, Dangote said, “I believe what will help us the most is mortgage financing or consumer credit. Most people go into corruption because they are worried about how to get a roof over their head, or how to buy furniture because we live in a society where everything you’re buying you pay cash.”
He cited an example whereby if one has a job and needs to purchase goods and services like a car of 5 million naira, instead of paying it at once, there should be provisions for the individual to pay like N50, 000 or N100, 000 every month. This means that once you have a job, you should be able to afford most things comfortably.
The business tycoon had previously stressed the need for the Central Bank of Nigeria (CBN) and commercial banks to develop consumer credit products in order to encourage low income earners to engage more in loan taking.
What you should know: Over the years, experts have insisted that mortgage finance is central to the nation’s economic development but it is yet to be given proper attention by the government. This reduces its contribution to the national Gross Domestic Product (GDP). Nigerian mortgage banks are known to charge between 19 to 24% or may be higher, depending on the risk volume.
Therefore, Dangote called for the assistance of government in making mortgage financing and consumer credit more accessible in the country.
…NHF incapable of meeting everyone’s housing needs, experts say
High mortgage rate, which continues to deny many Nigerians the privilege of owning homes, portrays how weak macro-economic fundamentals are in Africa’s most populous nation, experts have said.
The experts, who spoke at Real Estate Investment Series (REIS) organised by K. ParkWood in Lagos, added that this weakness undermines the country’s ability to bridge its housing deficit and also provide affordable houses for low-income earners who form the bulk of Nigeria’s population.
In advanced economies, the mortgage industry contributes significantly to economic development with a single digit interest rate. The reverse is the case in Nigeria, where relatively high inflation rate and high mortgage rates hurt demand for housing.
Nigeria needs annual production of about 750, 000 housing units for the next 20 years to close its housing deficit. And this is a herculean task for a country stuck with low growth after a 15-month recession, even as limited access to funds lowers the performance of mortgage industry.
Kayode Omotosho, the executive secretary of Mortgage Banking Association of Nigeria (MBAN), in his presentation at the August edition of REIS with the theme, ‘Financing Home Ownership: A Focus on Mortgages and Housing Funds as Veritable Platforms’, maintained that mortgage rate was in double-digit because it was largely determined by market conditions.
“Market condition is what determines interest rate. We want to assure you that we are mindful that double-digit rate on mortgage is not the best; we are in talks with the Central Bank of Nigeria, but economic issues have to be addressed for mortgage rate to come down to single digit,” he said.
The MBAN boss assured further that his organization remained committed to improving funding sources for housing projects. Part of efforts in this regard, according to him, was the registration of nine mortgage brokerage companies, creation of mortgage default loss of job insurance scheme as well as collateral replacement indemnity scheme.”
“When these schemes are fully implemented, you will begin to see representatives of mortgage banks approaching you to assist with funds to actualize your housing dream,” he said.
Omotosho stressed that the National Housing Fund (NFH) loans are insufficient to meet the housing needs of every Nigerian, saying there is the need for multiple housing vehicles.
“Nigeria cannot survive only on NHF. We need private sector-led public-driven mortgage institutions in the country”, he said, adding that Canada that has less than a quarter of Nigeria’s population has about three housing vehicles.
In his speech, Ahmed Dangiwa, the managing director of Federal Mortgage Bank of Nigeria (FMBN), represented by the bank’s deputy general manager, Abiodun Fashina, stated that accessibility and affordability of mortgage defined the business model of the bank.
Fashina, in his presentation, noted that the lower-income earners, who account for over 70 percent of Nigeria’s population, are most affected by the country’s housing issues. He, however, maintained that low income of workers is the chief constraint to accessing housing facility.
Giving the performance scorecards of the state-owned FBMN, Fashina said as at the end of June 2019, the bank had 23, 199 registered organizations, 4.68 million contributors, 1, 125 registered co-operative societies, 21, 987 co-operative members, 20, 000 NHF loans disbursed, 2, 214 micro-loans worth N4.3 billion disbursed and N750, 000 mortgage loans refinanced.
He added that FMBN would partner National Employers Consultative Association (NECA) and Trade Union Congress (TUC) to construct 100 houses across the country’s six geo-political zones.
Kayode Ogundimu, the chief executive officer at Nigeria Mortgage Refinance Company (NRMC), represented by Dorothy Obata, Head of Business Development, noted that the firm has in the last four years raised N19 billion to refinance mortgages.
“We issued an N8 billion Series I bond in 2015 and another N11 billion series II bond in 2017. This shows how serious we are with our mandate to promote home ownership across Nigeria.”
REIS is the first investor-centric series birthed to deepen the knowledge base of individual and institutional real estate investors.
The mortgage industry in Nigeria has got a lot of potentials that close industry watchers say, if harnessed, could lead to the growth of the industry and the wider economy.
A lot still needs to be done for the mortgage industry in Nigeria to get out of the woods. Apparently, the industry is in perpetual growth challenge that has kept its contribution to the gross domestic product (GDP) at a very low level.
Many factors have been fingered for this slow growth, including the Land Use Act of 1978 which rests land ownership rights on the state governors, the right to easily foreclose on delinquent borrowers, ease of creating a legal mortgage and perfecting titles and the ease of falling back on one’s collateral to recover bad loan, etc.
The relative newness of the industry, lack of understanding of its dynamics and operational models by many Nigerians, and poor appreciation of the need and the ultimate benefits of keeping money in a mortgage bank are other militating factors.
Another major impediment to the growth of the sector is low investment in the industry. This accounts significantly for the low contribution of the industry to Nigeria’s gross domestic product (GDP). In advanced economies of the world, the mortgage industry makes significant contribution to economic development, but in Nigeria, this is not the case.
Mortgage finance as a percentage of Gross Domestic Product (GDP) is as low as 0.5 percent which is several steps behind other economies including Mexico, Malaysia and South Africa where mortgage contributions to GDP are as high as 10 percent, 25 percent and 29 percent respectively.
However, notwithstanding the industry’s low contribution to GDP coupled with the challenging business environment, the industry has all the potential to stimulate the economy when all the identified obstacles inhibiting its growth are removed.
An economy like Nigeria’s can benefit a lot from a flourishing mortgage industry as it will help in directing the economy in the desired direction. As part of efforts at growing the economy, government can make the necessary investment aimed to grow the industry. Enabling policies should also be put in place, leading to reduced high interest rate that can encourage more people to embrace mortgage loans.
Operators are of the view that on account of the identified obstacles, some primary mortgage banks (PMBs) are going through very difficult times, such they are not able to meet loan applications from home seekers.
The operators insist that until all those issues are resolved in a way that encourages the provider of capital, in this case, the mortgage bank, to give out loans, the sector will not grow as desired.
But they hope that when these obstacles are removed, the supplier of mortgage will allocate more funds towards the provision of home loans while home buyers will better appreciate the implication of prompt interest and capital repayments as well as ensure discipline on the part of the people.
Some finance experts argue that limiting a mortgage institution to a fixed capital base of, say N10 billion, is wrong because that amount is too meager; even N100 billion is also meager given the kind of projects they finance.
For this reason, the Federal Government needs to come in, look at what is happening in other civilised world and copy because, these days, “copying is no longer an act of deception but actually something that is done even in the civilised world,” says Okika Ekwem, a US-based realtor.
Ekwem says that in the advanced economies like US and UK, there is a secondary market for real estate financing where commercial banks or individual brokerage banks lend money to people and thereafter sell the securitised certificate to the secondary market and come back again to lend to individuals.
Mortgage industry growth that can impact the economy, according to Meckson Innocent Okoro, is possible if the Federal Mortgage Bank of Nigeria (FMBN) plays the role of a regulator while the federal government, through the CBN, should empower the PMBs.
To have a viable mortgage industry that can have significant impact on the economy, more PMBs have to be licensed such that there could be as many as 40 in each of the big cities, while each of the smaller cities could get as many as 10.
This is to discourage the concentration of these banks in urban centres and when this is done, access to housing finance will be increased. The PMBs must be positioned to champion the whole issue of affordable or social housing for the low income earners in the country.
Mortgage finance as it is today, is not particularly established as a structure and as it exists in developed economies. The culture of mortgage finance is just gradually catching on with Nigerians and mortgage is financed the same way as every other commercial financing.
It is curious that after the recapitalisation and consolidation of the PMBs, Nigerians are yet to feel the impact in the economy. As at today, the interest rate as it is cannot mobilise the industry and the situation is such that even at 10 percent, the level of income in the country cannot still support mortgage growth.
There was a time in this country when the economy and the financial system were highly regulated, there was different interest rates structure for different sectors of the economy and within that period, lending to the housing sector was as low as seven to eight percent which underscored the importance attached to the sector and the government needs to look into this.
Driven down by worries about a trade war with China, mortgage rates have sunk to multiyear lows.
According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average tumbled to 3.6 percent with an average 0.6 point. (Points are fees paid to a lender equal to 1 percent of the loan amount and are in addition to the interest rate.) It was 3.75 percent a week ago and 4.59 percent a year ago. The 30-year fixed rate, which hasn’t been this low since November 2016, has fallen nearly a full percentage point since the first of the year.
The 15-year fixed-rate average dropped to 3.05 percent with an average 0.5 point. It was 3.2 percent a week ago and 4.05 percent a year ago. The five-year adjustable rate average declined to 3.36 percent with an average 0.3 point. It was 3.46 percent a week ago and 3.90 percent a year ago.
“Mortgage rates fell to fresh multiyear lows this week as intensifying trade tensions rattled markets,” said Matthew Speakman, a Zillow economist. “This week’s escalation of the conflict greatly overshadowed a series of market-moving economic reports, including July’s jobs data, typically the most-watched report each month, and pushed mortgage rates down sharply, as investors sought the safe haven of government bonds. With a light dose of economic data on deck for the coming week, the market’s attention will likely remain on gauging the impact of the trade war on the global economy.”
The yield on the 10-year Treasury sank to three-year lows this week as trade tensions with China escalated, global economic growth slowed and moves by central banks across the globe made investors anxious. It fell to 1.71 percent on Wednesday and hasn’t been above 2 percent this month.
Bond yields move in opposite directions of prices. When demand for bonds is high, prices rise and yields fall.
Long-term bonds tend to be the most reliable indicators of where mortgage rates are headed. However, home loan rates haven’t declined as sharply as the 10-year yield.
“The big move down in Treasury yields has not yet translated into similarly lower mortgage rates,” said Michael Becker, branch manager of Sierra Pacific Mortgage in White Marsh, Md. “Mortgage-backed securities have not rallied as much as Treasuries. This often happens when Treasury yields drop quickly.”
Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will move lower in the coming week. Becker is one of the experts predicting rates will continue to fall.
“Mortgage rates are the best they’ve been since November of 2016,” he said. “If this move in Treasury yields holds, I would expect mortgage rates to start to catch up with the move in Treasury yields and we will see lower rates in the coming week.”
Meanwhile, falling rates caused mortgage applications to pick up. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — increased 5.3 percent from a week earlier. The refinance index jumped 12 percent from the previous week, while the purchase index fell 2 percent.
The refinance share of mortgage activity accounted for 53.9 percent of all applications.
“The lowest mortgage rates in well over two years led to a surge in refinancing, with activity up 12 percent last week and 116 percent from a year ago,” said Bob Broeksmit, MBA president and CEO. “Purchase applications also continue to trend higher than year-ago levels, but activity has decreased in recent weeks. Concerns about the economic outlook and stock market volatility are likely causing some prospective buyers to delay their home search.”
The MBA also released its mortgage credit availability index (MCAI) this week that showed credit availability decreased in July. The MCAI edged down 0.4 percent to 189 last month. A decrease in the MCAI indicates lending standards are tightening, while an increase signals they are loosening.
“Credit availability in July decreased overall, driven by declines in the conforming and government indices,” Joel Kan, an MBA economist, said in a statement. “Conditions tightened some for borrowers with high loan-to-value ratios and lower credit scores. One outlier was the jumbo index, which increased to its highest level since the inception of this survey in 2012.”
Access to housing finance is getting increasingly less stressful and ‘cheaper’ for home buyers as both public and private sector operators are working on reviewing high interest rate which is a major challenge to mortgage affordability in Nigeria.
While the Federal Government through the Federal Mortgage Bank of Nigeria (FMBN) is now offering zero equity on loans below N5 million to all contributors to the National Housing Fund (NHF), plans are in progress for primary mortgage banks (PMBs) to offer mortgage loans at 9.9 percent interest rate to any first-time home buyer seeking N5 million loan for the purpose of owning a home.
A mortgage banking operator who disclosed this to BusinessDay on condition of anonymity explained that the 9.9 percent interest rate is being perfected by the Central Bank of Nigeria (CBN) which, he said, will be subsidising the rate in favour of home buyers.
“The Nigeria Mortgage Refinance Company (NMRC) will continue to go to the capital market to raise funds and will also continue to refinance our loans,” the operator explained. “What is going to happen is that if, for instance, we get our funds from either the NMRC or CBN at 15 percent interest rate, we will be required to lend to first-home buyers at 9.9 percent and CBN will off-set the balance.”
The operator admitted that 9.9 percent, which is an upper single-digit rate, is still very high, but noted that it was a good start on the journey towards addressing the affordability issue in the mortgage system which constitutes a huge golf between many Nigerians and homeownership. To the operator, what the mortgage industry needs today is reduction in interest rate and not recapitalisation as is being considered by the CBN.
“Capital adequacy is not the problem of the industry today. If the industry is not growing, it is not because of capital, because we have enough capital from the earlier recapitalisation and refinancing by the NMRC. The interest rate needs to be reduced so that more people will take loans. That way, the industry will grow,” the operator said.
Other industry operators and real estate stakeholders see the problem of the industry beyond recapitalisation.
Whereas Paul Onwuanibe, CEO, Landmark Group, blames lack of clarity for the industry’s slow growth, Adeniyi Akinlusi, CEO, Trustbond Mortgage Bank, looks at the structure of the industry.
“The structure of the mortgage industry is a problem; there is high interest rate and this is coming on the back of economic condition,” noted Akinlusi, who is also president of Mortgage Bankers Association of Nigeria (MBAN).
He stressed that “recapitalisation is not the main challenge, considering that mortgage banks do not give loans from shareholders’ funds but funds from deposits”.
Kehinde Ogundimu, MD/CEO of NMRC, shares the view that recapitalisation is not the main challenge of the mortgage industry, recalling that his company, as at December 2018, had refinanced mortgage loans originated by the lending institutions totalling N18 billion.
He explained that refinancing was in line with the company’s mandate to promote affordable home-ownership in the country by leveraging funding from the capital market to deepen liquidity in the primary and secondary mortgage markets.
Typically, mortgage interest rate in Nigeria hovers between 7 percent and 10 percent for FMBN mortgages and 15-25 percent for commercial mortgage institutions, making the country one of the highest in the world.
In advanced economies, the mortgage industry makes significant contribution to economic development with single-digit interest rates. But high inflation rate and the attendant high mortgage rate help to reduce housing demand and developers’ investment appetite.
This explains why Nigeria has one of the world’s lowest mortgage to Gross Domestic Product (GDP) rate at about 0.6 percent, which is far behind Ghana’s 2 percent, South Africa’s 30 percent and US and UK’s rates of 60 percent and 70 percent, respectively.
The economic tensions between the U.S. and China drove interest rates down last week, leading to a surge in refinance applications, according to the Mortgage Bankers Association.
And with the benchmark 10-year Treasury yield falling under 1.6% at one point Wednesday morning, more declines in mortgage rates are likely in the near term.
Mortgage application volume increased 5.3% on a seasonally adjusted basis from one week earlier, according to the MBA’s Weekly Mortgage Applications Survey for the week ending Aug. 2.
The seasonally adjusted purchase Index decreased 2% from one week earlier, while the unadjusted purchase index decreased 2% compared with the previous week and was 7% higher than the same week one year ago.
“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China. The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks,” Mike Fratantoni, the MBA senior vice president and chief economist, said in a press release.
“The 30-year fixed-rate mortgage fell to its lowest level since November 2016, and the drop resulted in an almost 12% increase in refinance application volume, bringing the index to a reading over 2,000 — its highest over the same time period. We fully expect that refinance volume will jump even higher this week given the further drop in rates. Lower mortgage rates did not pull more homebuyers into the market, as purchase volume slipped a bit last week.”
Adjustable-rate mortgage activity remained unchanged at 4.7% of total applications and the share of Federal Housing Administration-insured loan applications decreased to 11% from 11.3% the week prior.
The share of applications for Veterans Affairs-guaranteed loans increased to 12.8% from 12.6% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.6% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased 7 basis points to 4.01%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate decreased 8 basis points to 3.96%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 8 basis points to 3.86%. For 15-year fixed-rate mortgages, the average decreased 11 basis points to 3.37%. The average contract interest rate for 5/1 ARMs decreased to 3.36% from 3.52%.