MBA Weekly Applications: A Tale of Two Surveys

Mortgage applications yo-yoed over the past two weeks, falling by 13 percent over the holiday break before regaining most ground the first week of January, the Mortgage Bankers Association reported in its Weekly Applications Survey for the weeks ending Dec. 27, 2019 and Jan. 3.

The net result: mortgage applications fell by 1.5 percent over the two-week holiday break, as of Jan. 3. The results included adjustments for the holidays.

MBA reported the Market Composite Index decreased by 1.5 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased by 22 percent compared to two weeks ago.

The unadjusted Refinance Index decreased by 8 percent from two weeks ago and was 74 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 58.9 percent of total applications from 54.8 percent the previous week.

The seasonally adjusted Purchase Index increased by 5 percent from two weeks ago. The unadjusted Purchase Index decreased by 14 percent compared to two weeks ago and was 2 percent higher than the same week one year ago.

While index changes were calculated relative to two weeks prior, the following compositional and rate measures are presented relative to the previous week only.

The FHA share of total applications increased to 12.2 percent from 12.1 percent the week prior. The VA share of total applications increased to 14.1 percent from 13.9 percent the week prior. The USDA share of total applications decreased to 0.5 percent from 0.6 percent the week prior.

“Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level (3.91 percent) since early October,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Despite lower rates, refinance volume decreased these last two weeks, and we expect that it will slowly trail off in the first half of 2020 as long as mortgage rates remain in this same narrow range. Homeowners would need to see a sharp drop in rates to reinvigorate the refinance wave seen in 2019.”    

Fratantoni noted the end of the year is the slowest time for home sales, “so it is not at all surprising that activity was light. However, after a seasonal adjustment, purchase application volume was up relative to the pre-holiday period and started off 2020 ahead of last year’s pace. We expect that the strong job market will continue to support purchase activity this year, and the uptick in housing construction towards the end of last year should provide more inventory for prospective buyers.”

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.91 percent from 3.95 percent, with points increasing to 0.34 from 0.31 (including origination fee) for 80 percent loan-to-value ratio loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased to 3.88 percent from 3.92 percent, with points decreasing to 0.17 from 0.30 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by FHA decreased to 3.85 percent from 3.87 percent, with points decreasing to 0.23 from 0.28 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.35 percent from 3.37 percent, with points increasing to 0.29 from 0.28 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 adjustable-rate mortgages decreased to 3.19 percent from 3.27 percent, with points decreasing to 0.18 from 0.37 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The ARM share of activity decreased to 3.8 percent of total applications.

The survey covers more than 75 percent of all U.S. retail and consumer direct residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.