Mortgage Applications Rise in MBA Weekly Survey

Mortgage applications, fueled by an uptick in refinancings, increased for the first time in more than a month as key interest rates fell to three-year lows, the Mortgage Bankers Association reported this morning in its Weekly Mortgage Applications Survey for the week ending August 2.

The Market Composite Index increased by 5.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased by 5 percent compared to the previous week.

The unadjusted Refinance Index increased by 12 percent from the previous week and was 116 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 53.9 percent of total applications from 50.5 percent the previous week.

The seasonally adjusted Purchase Index decreased by 2 percent from one week earlier. The unadjusted Purchase Index decreased by 2 percent compared to the previous week and was 7 percent higher than the same week one year ago.

The FHA share of total applications decreased to 11.0 percent from 11.3 percent the week prior. The VA share of total applications increased to 12.8 percent from 12.6 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent the week prior.

“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China,” said MBA Chief Economist Mike Fratantoni. “The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks.”

Fratantoni noted the 30-year fixed rate mortgage fell to its lowest level since November 2016, and the drop resulted in a nearly 12 percent increase in refinance application volume, bringing the index to a reading above 2,000, its highest over the same period. “We fully expect that refinance volume will jump even higher this week given the further drop in rates,” he said.

Lower mortgage rates, Fratantoni added, did not pull more homebuyers into the market, as purchase volume slipped a bit last week, but still remains nearly 7 percent ahead of last year’s pace.

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.01 percent from 4.08 percent, with points increasing to 0.37 from 0.34 (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 3.96 percent from 4.04 percent, with points increasing to 0.26 from 0.22 (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 3.86 percent from 3.94 percent, with points increasing to 0.38 from 0.29 (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 3.37 percent from 3.48 percent, with points increasing to 0.37 from 0.26 (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 3.36 percent from 3.52 percent, with points increasing to 0.36 from 0.31 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The ARM share of activity remained unchanged at 4.7 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.