Mortgage applications weakened as rate declines slowed

There was a drop in mortgage applications in the week ending August 16 as the decline easing of mortgage rates eased.

The 0.9% decline in applications (seasonally adjusted, 2% unadjusted) was driven by a 4% week-over-week decline in purchase applications (seasonally adjusted, 5% unadjusted) while refinance applications gained 0.4%.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey data also shows that the refinance index was 180% higher than the same week of 2018 while the purchase index was up 5% year-over-year.

"In a week where worries over global economic growth drove U.S. Treasury yields 13 basis points lower, the 30-year fixed mortgage rate decreased just three basis points. As a result, the refinance index saw only a slight increase but remained at its highest level since July 2016," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The small moves in rates and refinancing are potentially signs that lenders may be approaching capacity constraints as they continue to deal with the largest wave of refinance activity in three years. The refinance share of applications, at almost 63%, was also at its highest level since September 2016."

Share of apps

The MBA data shows that:

• The refinance share of mortgage activity increased to 62.7% of total applications from 61.4% the previous week;
• The adjustable-rate mortgage (ARM) share of activity increased to 6.4% of total applications;
• The FHA share of total applications increased to 9.7% from 9.5% the week prior;
• The VA share of total applications decreased to 11.6% from 12.2% the week prior;
• The USDA share of total applications remained unchanged from 0.5% the week prior.

Average contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.90% from 3.93%, with points remaining unchanged at 0.35 (including the origination fee) for 80% loan-to-value ratio (LTV) 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 $484,350) remained unchanged at 3.88%, with points remaining unchanged at 0.24 (including the origination fee) for 80% LTV loans. The effective rate remained unchanged from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.87% from 3.81%, with points increasing to 0.32 from 0.29 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.30% from 3.28%, with points decreasing to 0.33 from 0.34 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.35% from 3.43%, with points increasing to 0.41 from 0.35 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.