Mortgage demand has been shockingly weak this year, even as interest rates have plunged to historic lows. A recent survey conducted by the Mortgage Bankers Association (MBA) showed that demand dropped to its lowest level in 27 years despite the widespread drop in interest rates.
The survey showed that demand dropped significantly in the week ending April 10, with the weekly refinance index dropping by 55.6% and the purchase index dropping by 10.1%. This is a stark contrast to the first week of March, when the refinance index was up by 217.5% and the purchase index was up by 6.4%, suggesting that the potential economic fallout of the COVID-19 pandemic has begun to take hold.
The drop in demand is most likely a result of the economic uncertainty caused by the pandemic, as potential mortgage applicants are concerned about their job security and their ability to repay the loan. Additionally, potential buyers may also feel reluctant to make a large long-term purchase commitment during a time when the global economy is facing an unprecedented level of uncertainty.
Although interest rates are lower than ever, it appears that potential borrowers are not taking full advantage of the opportunity. It appears that the current pandemic and the resulting economic uncertainty is causing potential borrowers to remain on the sidelines for the near future. It will be interesting to see how the mortgage market responds over the coming months and how quickly demand recovers.