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Refinancing share shoots up following dramatic mortgage rate drop

Refinances jumped in July in response to a considerable mortgage rate drop from the month prior, according to Ellie Mae's Origination Insights Report.

The 30-year note rate fell to 4.18% in June, down from 4.91% a year ago and from May's 4.4%. This pushed up the share of refinances to 38% from 29% last July, and from 31% just a month earlier. Similar activity is expected in response to further rate declines.

"Shrewd homeowners are locking in lower interest rates which have driven the spike in refinance activity in July. And with the Federal Reserve cutting rates further, we expect to see continued activity as homebuyers are able to stretch their dollar and enter the market," Jonathan Corr, president and CEO of Ellie Mae, said in a press release.

With this increase in refi share, closing times for the loan type increased to 40 days from 38 month-over-month among users of Ellie Mae's loan origination system. Closing times for home purchases sped up, falling to 43 days from 45 over the same period. Overall closing times held steady at 42 days.

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Closing rates reached a new high of 77% in July, up from 76.8% in June. Purchase loan closing rates increased to 79.3% from 78.8%, but refi closing rates slid to 72.9% from 73.4%.

The share of adjustable-rate mortgages declined to 5.7% in July, down from 6.6% during the same period a year ago and from 6.3% the previous month. Six months ago, the ARM share was 8.6%.

Average FICO scores for loans closed in July held steady at 731 for the second straight month.

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