Last Week's Low Rates Drove Ongoing Refi Surge

Applications for refinancing again drove a significant increase in mortgage applications during the week ended February 12 as mortgage rates continued to decline.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage application volume, rose 8.2 percent compared to the week ended February 5 on a seasonally adjusted basis and was up 10 percent on an unadjusted basis.

Refinancing accounted for 64.3 percent of the applications submitted during the week, up from 61.2 percent a week earlier and the highest share since February of last year.  The volume of those refinancing applications rose 16 percent from a week earlier and the index for conventional refinance applications was up by the same amount week-over-week and reached the highest level since January 2015.

Despite some of the lowest interest rates in a year the enthusiasm for mortgages did not carry over to the purchase side.  The seasonally adjusted Purchase Index was down 4 percent from the previous week although it increased by 2 percent on an unadjusted basis and remained 30 percent higher than during the same week in 2015.

The refinance share of mortgage activity increased to its highest level since February 2015, 64.3 percent of total applications, from 61.2 percent the previous week.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

The FHA share of total applications decreased to 11.5 percent from 12.3 percent the week prior. The VA share of total applications increased to 11.7 percent from 11.1 percent the week prior. The USDA share of total applications remained unchanged from 0.6 percent.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since April 2015, 3.83 percent, from 3.91 percent, with points decreasing to 0.36 from 0.41 (including the origination fee) for 80 percent 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 mortgages with jumbo loan balances (greater than $417,000) decreased to its lowest level since December 2012, 3.74 percent, from 3.76 percent, with points decreasing to 0.26 from 0.30 (including the origination fee) for 80 percent 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 its lowest level since April 2015, 3.67 percent, from 3.72 percent, with points increasing to 0.34 from 0.33 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to its lowest level since April 2015, 3.11 percent, from 3.18 percent, with points decreasing to 0.31 from 0.38 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to its lowest level since May 2015, 2.92 percent, from 2.96 percent, with points increasing to 0.32 from 0.30 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week. The adjustable-rate mortgage (ARM) share of activity increased to 6.7 percent of total applications.

MBA's Weekly Mortgage Application Survey which has been conducted since 1990, reaches originators of over 75 percent of the U.S. retail residential mortgage market. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information presumes mortgages with an 80 percent loan-to-value ratio and points that include the originations fee.