Mortgage applications up 5% as virus fears lead to rate reduction
There was a 5% increase (seasonally adjusted) in a weekly measure of mortgage application volume last week.
That saw the Mortgage Bankers Association’s Composite Market Index reach its highest level since May 2013. It was up 20% on an unadjusted basis compared to the previous week (which included an adjustment for the Martin Luther King Jr. holiday.
The gain was driven by a surge in refinance activity while purchasers were reluctant to commit.
"The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks to 3.71 percent, its lowest level since October 2016," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.
The Refinance Index was up 15% from the previous week - its highest level since June 2013 - and was 183% higher than the same week one year ago.
"Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates," added Kan.
The Purchase Index was down 10% week-over-week (seasonally adjusted) while the unadjusted Purchase Index increased 8% compared week-over-week and was up 11% year-over-year.
"Prospective buyers weren't as responsive to the decline in mortgage rates - likely because of suppressed supply levels," said Kan.
The stats
Compared to a week earlier:
- The refinance share of mortgage activity increased to 64.5% of total applications from 60.4% the previous week.
- The adjustable-rate mortgage (ARM) share of activity increased to 5.9% of total applications.
- The FHA share of total applications decreased to 9.6% from 10.7% the week prior.
- The VA share of total applications decreased to 10.2% from 11.7% the week prior.
- The USDA share of total applications decreased to 0.4% from 0.5% the week prior.
Effective rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71% from 3.81%, with points remaining unchanged at 0.28 (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 $510,400) decreased to 3.70% from 3.78%, with points decreasing to 0.19 from 0.20 (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 decreased to 3.80% from 3.82%, with points decreasing to 0.26 from 0.27 (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 decreased to 3.19% from 3.24%, with points increasing to 0.23 from 0.22 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.23% from 3.15%, with points increasing to 0.15 from 0.12 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
