Bank of America Mortgage Applications Jumped 80% In Q1, Says Executive

According to its consumer lending executive, Bank of America (BAC.N) experienced an 80% rise in mortgage applications from January to March, as buyers were attracted by the growing home inventory and decreasing long-term bond yields. “We are observing a consistent rise in home buying activity, exceeding typical seasonal patterns,” said Matt Vernon, head of consumer lending at the second-largest U.S. lender, to Reuters. "We've experienced a rise of 80 per cent in our applications from January until now, whereas typically, we would observe about a 60% increase." He stated that the decline in U.S. 10-year bond yields last autumn, which serves as a standard for mortgage rates, motivated additional buyers to re-enter the market.

The yield fell to roughly 3.6 per cent in September, the lowest level since June 2023, leading to a decrease in the 30-year mortgage rate (USMG=ECI) to 6.1 per cent in early October. As per LSEG's data based on the Mortgage Bankers Association's average fixed 30-year contract rate, the interest rate for a 30-year mortgage currently stands at 6.7 per cent, which remains under the 7 per cent recorded a year ago. BofA's Vernon stated that an increase in inventory entering the market is resulting in greater stability and eventual growth in terms of mortgages. "With rates staying stable or gradually dropping, we're observing increased demand from buyers compared to previous years," said Vernon.

Interest in refinancing mortgages is increasing as well, but approximately 80 per cent of the bank's loans have interest rates under 6 per cent, meaning rates would need to drop further to boost demand. "At levels below 6 per cent, we could observe a significant improvement from a rate standpoint," stated Vernon. Sales of existing homes in the U.S. unexpectedly rose in February as a boost in supply attracted buyers back into the market. A February Reuters survey of real estate experts indicated that affordability in the U.S. housing market is expected to improve slightly over the next year, anticipating some additional interest rate reductions rather than an increase in homes for sale.

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Mortgage lender UWM Holdings (UWMC.N) anticipates increased demand for new mortgages and refinancing, according to Chief Strategy Officer Alex Elezaj in a statement to Reuters. "Overall, individuals are feeling optimistic about the economy. I get the impression that they believe the situation has settled after the election," he remarked and added, "Individuals are becoming aware that... rates might increase or decrease, yet it's still a great opportunity for me to consider my alternatives."

UWM anticipates it will generate between $28 billion and $35 billion in mortgage and refinancing originations during the first quarter, an increase from $27.6 billion the previous year. The firm recruited additional staff to manage the anticipated increase in business. It reported that its workforce grew to 9,100 by the close of 2024, up from approximately 6,700 a year prior. "We are fully prepared across all areas to manage nearly twice the amount," stated Elezaj.