Mortgage Applications Hit 6-Year High in MBA Weekly Survey

Mortgage application activity continued its strong start to 2020, driven by refinances to its highest level in six years as key interest rates plunged, the Mortgage Bankers Association reported this morning in its Weekly Applications Survey for the week ending Jan. 31.

The previous week’s results included an adjustment for the Martin Luther King Jr. holiday.

The Market Composite Index increased by 5.0 percent on a seasonally adjusted basis from one week earlier to its highest level since May 2013. On an unadjusted basis, the Index increased by 20 percent compared to the previous week.

The unadjusted Refinance Index increased by 15 percent from the previous week to its highest level since June 2013, and was 183 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 64.5 percent of total applications from 60.4 percent the previous week.

The seasonally adjusted Purchase Index decreased by 10 percent from one week earlier. The unadjusted Purchase Index increased by 8 percent compared to the previous week but was 11 percent higher than the same week one year ago.

The FHA share of total applications decreased to 9.6 percent from 10.7 percent the week prior. The VA share of total applications decreased to 10.2 percent from 11.7 percent the week prior. The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.

“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates.”

Kan noted prospective buyers “weren’t as responsive to the decline in mortgage rates – likely because of suppressed supply levels. Purchase applications took a step back, but still remained 11 percent higher than a year ago,” he said. 

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71 percent from 3.81 percent, with points unchanged at 0.28 (including origination fee) for 80 percent loan-to-value ratio loans. The effective rate decreased from last week. The 30-year fixed rate fell for the fifth time in six weeks, its lowest level since October 2016,

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to 3.70 percent from 3.78 percent, with points decreasing to 0.19 from 0.20 (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 3.80 percent from 3.82 percent, with points decreasing to 0.26 from 0.27 (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 3.19 percent from 3.24 percent, with points increasing to 0.23 from 0.22 (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 increased to 3.23 percent from 3.15 percent, with points increasing to 0.15 from 0.12 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The ARM share of activity increased 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.