Despite a drop in refinance activity, borrowers continue to take advantage of low rates
Mortgage loan application volume dropped last week as some buyers and sellers put their spring home shopping on hold due to the economic shutdown caused by coronavirus pandemic.
The Mortgage Bankers Association's Market Composite Index inched down 0.3% on a seasonally adjusted basis for the week ending April 17. On an unadjusted basis, the index was also 0.1% lower than the previous week.
Mortgage applications saw a 1% decline in refinances offset by a 2% rise in purchase applications. However, the refinance index was 225% higher than the same week last year, while the seasonally unadjusted purchase index was 31% lower than 2019 levels.
The refinance share of mortgage activity shrank, down from 76.2% to 75.4% of total applications. The adjustable-rate mortgage (ARM) share of activity grew to 2.8% of total applications.
"California and Washington, two states hit hard by COVID-19, saw another week of rising activity – partly driving the overall increase," said Joel Kan, associate vice president of economic and industry forecasting at MBA. "The pandemic-related economic stoppage has caused some buyers and sellers to delay their decisions until there are signs of a turnaround. This has resulted in reduced buyer traffic, less inventory, and March existing-homes sales falling to their slowest annual pace in nearly a year."
The FHA share of total applications increased eight basis points to 10.3% week over week. The VA share of total applications fell from 14.3% to 13.8%, while the USDA share of total applications held steady at 0.4% from the prior week.
"Despite the 30-year fixed rate remaining at a record low in MBA's survey, the refinance index dropped slightly last week but remained close to its 2013 highs," Kan said. "Borrowers continue to take advantage of low rates to gain some monthly savings, which is a welcome reprieve during these tough economic times."
