Mortgage Applications Tumble in MBA Weekly Survey

Mortgage applications took a tumble this week as key interest rates jumped to their highest level since January amid increased economic turmoil, the Mortgage Bankers Association reported this morning in its Weekly Mortgage Applications Survey for the week ending March 20. 

The Market Composite Index decreased by 29.4 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased by 29 percent compared to the previous week. 

The unadjusted Refinance Index decreased by 34 percent from the previous week and was 195 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 69.3 percent of total applications from 74.5 percent the previous week.

The seasonally adjusted Purchase Index decreased by 15 percent from one week earlier. The unadjusted Purchase Index decreased by 14 percent compared to the previous week and was 11 percent lower than the same week one year ago.

The FHA share of total applications increased to 8.4 percent from 7.3 percent the week prior. The VA share of total applications decreased to 12.5 percent from 14.5 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

“The 30-year fixed mortgage rate reached its highest level since mid-January last week, even as Treasury yields remained at relatively low levels,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines and remote work staffing challenges.”

Kan said looking ahead, this week’s additional actions taken by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market “could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance.”  

Kan said home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes, noting last week’s purchase index fell 15 percent to its lowest level since August 2019 and compared to a year ago, purchase applications were down 11 percent, the first year-over-year decline in more than three months. “Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook,” he said. 

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.82 percent from 3.74 percent, with points decreasing to 0.35 from 0.37 (including origination fee) for 80 percent loan-to-value ratio loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.84 percent from 3.77 percent, with points increasing to 0.35 from 0.32 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by FHA decreased to 3.69 percent from 3.71 percent, with points increasing to 0.43 from 0.28 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.28 percent from 3.10 percent, with points increasing to 0.38 from 0.37 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 adjustable-rate mortgages increased to 3.38 percent from 3.19 percent, with points increasing to 0.26 from 0.19 (including origination fee) for 80 percent LTV loans.  The effective rate increased from last week.

The ARM share of activity decreased to 6.1 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.