Mortgage Applications Blast Off in MBA Weekly Survey

The lowest interest rates in eight years sent refinance applications soaring last week, the Mortgage Bankers Association reported this morning in its Weekly Mortgage Applications Survey for the week ending March 6. 

The Market Composite Index jumped by 55.4 percent on a seasonally adjusted basis from one week earlier to its highest level since April 2009. On an unadjusted basis, the Index increased by 54 percent compared to the previous week. 

The unadjusted Refinance Index increased 79 percent from the previous week to its highest level since April 2009 and was 479 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 76.5 percent of total applications from 66.2 percent the previous week.

The seasonally adjusted Purchase Index increased by 6 percent from one week earlier. The unadjusted Purchase Index increased by 7 percent compared to the previous week and was 12 percent higher than the same week one year ago.

The FHA share of total applications decreased to 6.9 percent from 9.3 percent the week prior. The VA share of total applications increased to 13.1 percent from 10.5 percent the week prior. The USDA share of total applications decreased to 0.3 percent from 0.4 percent the week prior.

“Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Homeowners rushed in, with refinance applications jumping 79 percent–the largest weekly increase since November 2008. With last week’s increase, the refinance index hit its highest level since April 2009.”

Kan noted the purchase market benefited as well. “The purchase market also had a solid week, with activity nearly 12 percent higher than a year ago,” he said. “Prospective buyers continue to be encouraged by improving housing inventory levels in some markets and very low rates.”    

In response to the current interest rate environment, MBA now forecasts total mortgage originations to come in at nearly $2.61 trillion this year–a 20.3 percent gain from 2019’s volume ($2.17 trillion). Refinance originations are expected to double earlier MBA projections, jumping by 36.7 percent to nearly $1.23 trillion. Purchase originations are now forecasted to rise 8.3 percent to $1.38 trillion (see today’s story in MBA NewsLink.)

“Taking into the account the current economic situation and how much rates have fallen, MBA is nearly doubling its 2020 refinance originations forecast,” Kan said. “As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This in turn will support borrowers looking to refinance or purchase a home this spring.”  

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to its lowest level since December 2012, equaling the lowest level in survey history at 3.47 percent, from 3.57 percent with points increasing to 0.27 from 0.26 (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 $510,400) decreased to its lowest level since the series was added in 2011, 3.58 percent, from 3.63 percent, with points decreasing to 0.20 from 0.21 (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 3.57 percent from 3.74 percent, with points unchanged at 0.25 (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 2.90 percent from 3.03 percent, with points increasing to 0.26 from 0.24 (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 3.02 percent from 3.12 percent, with points increasing to 0.25 from 0.14 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The ARM share of activity decreased to 5.9 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.