Mortgage applications on a rise as rates continue to plummet
In the post pandemic US economy, the housing market has gained momentum and has emerged as a key strength in a bid for economic recovery. In recent months, the mortgage rates have declined steadily, reaching an all time record low in the month of September. The rates for 30-Year Fixed, 15-Year Fixed, and 5/1 ARM were as low as 2.9%, 2.4%, and 2.9% respectively (as of 24th September).
This translates to the fact that buying a house is much cheaper now. As such, mortgage applications have seen a dramatic increase in recent times. Applications to take out new mortgages to purchase homes have seen a 13% increase in the first week of August compared to the same period last year.
A substantial portion of applications are to refinance existing mortgages. According to a report by mortgage data firm Black Knight, 19.3 million American homeowners have an opportunity to save money by swapping their old mortgages for new loans. As such, the volume of applications to refinance a home loan is 80% higher than what it was in June 2019, and makes up nearly two-thirds of the total volume of applications. Online mortgage lender, Better.com has seen a mind-boggling 248% spike in refinance applications since 1st March.
With traditional brick and mortar banks being comparatively inaccessible due to social distancing norms, online mortgages have emerged as a convenient, affordable and viable alternative. Online mortgage lenders like Better.com, LoanDepot, United Wholesale Mortgage (UWM) and Rocket Mortgage have seen a whopping 202%, 267%, 152%, and 106% growth respectively in website traffic since the beginning of the year. This growth skyrocketed around April and May when mortgage rates began to plummet and COVID restrictions began to tighten. Between June and July, website traffic for Better.com, LoanDepot, UWM, and Rocket Mortgage increased by 42%, 71%, 37%, and 19% respectively.
Even in this tumultuous period of rampant layoffs and furloughs, these companies have significantly bolstered their ranks and are seeking opportunities to grow. Better.com has seen a rise in employee count of 338% from July 2019 to July 2020. In fact, it has doubled its workforce in the past six months alone and is nearing a deal to raise more than $100 million in new funding that would value the company at about $4 billion, up from about $720 million last year. LoanDepot has seen a growth of 16% in employee count from last year and UWM has seen a growth of 12% in employee count this year alone.
With most experts saying that mortgage rates could hover around these historically low levels for a foreseeable future, the online mortgage industry looks like an interesting market to track.