Mortgage Applications Drop over Holidays
Despite near-record low interest rates, Americans had the holidays in mind and not mortgages, the Mortgage Bankers Association reported this morning in its Weekly Applications Survey for the weeks ending Dec. 25 and Jan. 1.
The results include adjustments to account for the holidays.
The Market Composite Index decreased by 4.2 percent on a seasonally adjusted basis from two weeks earlier. On an unadjusted basis, the Index decreased by 33 percent from two weeks ago.
The holiday adjusted Refinance Index decreased by 6 percent from two weeks ago. The unadjusted Refinance Index was 34 percent lower than two weeks ago and was 100 percent higher than the same week one year ago.
The seasonally adjusted Purchase Index decreased by 0.8 percent from two weeks ago. The unadjusted Purchase Index decreased by 30 percent compared to two weeks earlier but was 3 percent higher than the same week one year ago.
“Mortgage rates started 2021 close to record lows, most notably with the 30-year fixed rate at 2.86 percent, and the 15-year fixed rate at a survey low of 2.40 percent,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The record-low rates for fixed-rate mortgages is good news for borrowers looking to refinance or buy a home, as around 98 percent of all applications are for fixed-rate loans. Despite these low rates, overall application activity fell sharply during the holiday period – which is typical every year. Refinance applications were 6 percent lower than two weeks ago, and purchase activity less than 1 percent from its pre-holiday level.”
Kan noted steady demand for home buying throughout most of 2020 should continue in 2021; the MBA forecast calls for purchase originations to rise to a record $1.59 trillion this year.
While the index changes were calculated relative to two weeks prior, the following compositional and rate measures are presented relative to the previous week only.
The FHA share of total applications remained unchanged from 10.1 percent the week prior. The VA share of total applications increased to 13.6 percent from 12.1 percent the week prior. The USDA share of total applications increased to 0.4 percent from 0.3 percent the week prior.
MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 2.86 percent from 2.90 percent, with points increasing to 0.35 from 0.31 (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 3.08 percent from 3.09 percent, with points increasing to 0.32 from 0.30 (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 2.90 percent from 2.95 percent, with points increasing to 0.33 from 0.28 (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 2.40 percent from 2.42 percent, with points increasing to 0.29 from 0.28 (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 2.63 percent from 2.57 percent, with points decreasing to 0.41 from 0.50 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.
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.
