MBA Chart of the Week: Conventional Purchase Applications–Average Loan Size by Product
Comparing data for the month of June going back five years, we saw average loan balances on conventional, home purchase applications increase steadily for 30-year fixed rate mortgages and for hybrid adjustable-rate mortgages.
Hybrid ARM loans typically have a three-year, five-year, seven-year or 10-year fixed period. This past June, 30-year fixed products accounted for nearly 88 percent of conventional purchase applications, compared to 85 percent in June 2012, while the 15-year fixed and hybrid ARM loans accounted for nearly 5 percent each, compared to 7 percent and 5 percent, respectively in June 2012. Traditional one-year ARMs and other fixed products accounted for nearly 2 percent.
Hybrid ARM loans were historically a product preferred by first-time home buyers or jumbo borrowers, who typically preferred the lowest possible monthly payment before either selling their homes or refinancing later on. However, with an extended period of low mortgage rates, many borrowers sought fixed-rate loans instead, leaving only the highest loan amounts in the hybrid ARM space.
As applications for higher balance home purchase loans grew faster than for lower balance loans in recent years, average loan sizes on 30-year fixed loans were driven up as well. The 15-year fixed loan tends to be more popular with refinance borrowers, who have paid down more of their principal and/or who can afford higher monthly payments, which is why the average loan amount for this product was relatively flat.
To view the Chart of the Week, click https://www.mba.org/news-research-and-resources/forecasts-data-and-reports/forecasts-and-commentary/chart-of-the-week.
(Anh Doan is senior financial analyst with MBA. She can be reached at adoan@mortgagebankers.org. Lynn Fisher is vice president of research and economics with MBA; she can be reached at lfisher@mba.org. Joel Kan associate vice president of economic forecasting with MBA; he can be reached at jkan@mba.org.)
