Rate rise meant fewer refinance applications last week

Last week saw a double-digit drop in mortgage applications as homeowners were dissuaded from refinancing by increased mortgage rates.

Overall applications fell for the week ending September 20, 2019, according to the Mortgage Bankers Association’s Weekly Mortgage Application Survey.

Its Market Composite Index was down 10.1% seasonally adjusted and 11% unadjusted. The Refinance Index dropped 15% week-over-week but compared to a year earlier it was up 104%.

For the Purchase Index there was a 3% decrease on a seasonally adjusted basis, 4% unadjusted. The index was up 9% year-over-year.

"US Treasury yields trended downward over the course of last week, as the Federal Reserve meeting highlighted the elevated uncertainty in the economic outlook,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. “However, despite falling yields, mortgage rates ticked up again and have risen 20 basis points over the past two weeks," "The increase in rates led to fewer refinances, and activity has now dropped 17% over the last two weeks."

Share of activity

• The refinance share of mortgage activity decreased to 54.9% of total applications from 57.9 percent the previous week;
• The adjustable-rate mortgage (ARM) share of activity increased to 5.1% of total applications;
• The FHA share of total applications increased to 11.4% from 10.9% the week prior;
• The VA share of total applications increased to 13.1% from 12.7% the week prior;
• The USDA share of total applications remained unchanged from 0.6% 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) increased to 4.02% from 4.01%, with points increasing to 0.38 from 0.37 (including the origination fee) for 80% loan-to-value ratio (LTV) 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 $484,350) decreased to 4.00% from 4.01%, with points decreasing to 0.26 from 0.29 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.90% from 3.89%, with points decreasing to 0.23 from 0.30 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 3.46% from 3.42%, with points remaining unchanged at 0.36 (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 3.39% from 3.54%, with points remaining unchanged at 0.29 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.