Borrowers’ FICO scores rose to new 2020 highs as interest rates slid to a new historic low in September, according to Ellie Mae.
Data from Ellie Mae's latest origination insight report showed that the 30-year note rate for VA loans fell to its lowest level, down to 2.78% from 2.86% month over month. Similarly, the 30-year rate on FHA loans fell from 3.10% to 3.01% in September, while conventional rates remained the highest overall at 3.02%. However, note rates for conventional loans were still down from 3.12% the month before.
"We are continuing to see interest rates decrease to new historic lows, hovering right at three percent for the month for all loans," said Joe Tyrrell, president of ICE Mortgage Technology. "As we move into fall and the traditionally hot summer homebuying season normally tapers off, we will watch to see if purchase loan applications trend downward and refinances regain momentum. We know that homeowners are continuing to take advantage of the low rates, almost an entire percentage point lower than the same period in 2019, as a means to lower monthly payments and stretch their dollar."
Of all closed loans, the share of refinances edged up to 58%, while purchase loans dipped back to 42%.
With interest rates on a downtrend, Tyrrell said that mortgage lenders are tightening their standards through FICO scores. The average FICO score for all loans rose to a record high of 753, up one point from August.
"We're seeing FICO scores rise to new 2020 highs, approximately 20 points higher than the same period in 2019, indicating that lenders are being more selective, but also that homebuyers and homeowners should understand the various loan products available to find the one that suits their profile best," Tyrrell said.
Closing rates were down from 77.2% in August to 77.1 in September.
The time to close all loans increased from 49 days to 51 days month over month. Time to close for purchase loans increased to 47 days in September, up from 45 days in August. Time to close for refinances increased to 54 days in September, up from 50 days in August.