MBA Weekly Applications Survey Mar. 24, 2021: Rising Rates Stall Refis

Steadily rising mortgage interest rates reached a nine-month high last week, putting the buzzkill on refinance activity, the Mortgage Bankers Association reported Wednesday in its Weekly Mortgage Applications Survey for the week ending March 19. 

The Market Composite Index decreased by 2.5 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased by 2 percent compared to the previous week. 

The culprit: refinances. The unadjusted Refinance Index fell by 5 percent from the previous week and was 13 percent lower than the same week one year ago. The refinance share of mortgage activity decreased to 60.9 percent of total applications from 62.9 percent the previous week.

Purchase originations made up part of the deficit, however. The seasonally adjusted Purchase Index increased by 3 percent from one week earlier. The unadjusted Purchase Index increased by 3 percent compared to the previous week and was 26 percent higher than the same week one year ago.

The FHA share of total applications remained unchanged from 11.7 percent the week prior. The VA share of total applications decreased to 9.8 percent from 10.3 percent the week prior. The USDA share of total applications remained unchanged from 0.4 percent the week prior.

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.36 percent from 3.28 percent, with points increasing to 0.42 from 0.41 (including origination fee) for 80 percent loan-to-value ratio loans.  The effective rate increased from last week.

“The 30-year fixed mortgage rate increased to 3.36 percent last week and has now risen 50 basis points
since the beginning of the year, in turn shutting off refinance incentives for many borrowers,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Refinance activity dropped to its slowest pace since September 2020, with declines in both conventional and government applications. Mortgage rates have moved higher in tandem with Treasury yields, as the outlook for the U.S. economy continues to improve amidst the faster vaccine rollout and states easing pandemic-related restrictions.”

Kan noted purchase applications were strong over the week, driven both by households seeking more living space and younger households looking to enter homeownership. “The average purchase loan balance increased again, both by quickening home-price growth and a rise in higher-balance conventional application,.” he said. “Inadequate housing inventory continues to put upward pressure on home prices. As both home-price growth and mortgage rates continue this upward trend, we may see affordability challenges become more severe if new and existing supply does not significantly pick up.”

MBA reported the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.40 percent from 3.34 percent, with points increasing to 0.43 from 0.40 (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 increased to 3.35 percent from 3.25 percent, with points increasing to 0.41 from 0.38 (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 2.72 percent from 2.67 percent, with points increasing to 0.40 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 decreased to 2.79 percent from 2.82 percent, with points increasing to 0.44 from 0.30 (including origination fee) for 80 percent LTV loans. The effective rate increased from last week.

The ARM share of activity increased to 3.2 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.