Despite Record-Low Interest Rates, Mortgage Applications Down in MBA Weekly Survey

Mortgage applications fell by nearly 5 percent for the week ending Sept. 25 from one week earlier despite the lowest 30-year fixed rate in the history of the Mortgage Bankers Association’s Weekly Mortgage Applications Survey. 

The Market Composite Index decreased by 4.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased by 5 percent compared to the previous week. 

The unadjusted Refinance Index decreased by 7 percent from the previous week but was 52 percent higher than the same week one year ago.

The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 22 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 63.3 percent of total applications from 64.3 percent the previous week.

The FHA share of total applications increased to 11.4 percent from 10.1 percent the week prior. The VA share of total applications decreased to 11.9 percent from 12.0 percent the week prior. The USDA share of total applications decreased to 0.5 percent from 0.6 percent the week prior.

“Despite the decline in rates, refinances fell over 6 percent, driven by a 9 percent drop in conventional refinance applications,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “There are indications that refinance rates are not decreasing to the same extent as rates for home purchase loans, and that could explain last week’s decline in refinances. Many lenders are still operating at full capacity and working through operational challenges, ultimately limiting the number of applications they are able to accept.” 

Kan noted purchase applications also decreased last week, but activity was still at a strong year-over-year growth rate of 22 percent. “Even as pent-up demand from earlier in the year wanes, there continues to be action in the higher price tiers, with the average loan balance remaining close to an all-time survey high,” 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 3.05 percent from 3.10 percent—the lowest 30-year fixed rate in the history of the MBA survey—with points increasing to 0.52 from 0.46 (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 3.33 percent from 3.35 percent, with points decreasing to 0.39 from 0.42 (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 3.15 percent from 3.23 percent, with points increasing to 0.43 from 0.37 (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 increased to 2.65 percent from 2.64 percent, with points increasing to 0.49 from 0.47 (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 decreased to 2.95 percent from 3.19 percent, with points decreasing to 0.55 from 0.64 (including origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The ARM share of activity remained unchanged at 2.2 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.