Refinance Activity Undeterred by Short Holiday Week

Record low interest rates coupled with a major American holiday made for a bit of chaos as regards mortgage applications.  The Mortgage Bankers Association (MBA) reported its Market Composite Index, a measure of application volume, posted an increase of 7.2 percent on a seasonally adjusted basis during the week ended July 8 while the index was down 14 percent unadjusted.  The week's results included an adjustment to account for the Fourth of July holiday. 

The Refinance Index, which is not seasonally adjusted, added to its 14 percent gain during the week ended July 1 by moving up another 11 percent.  The refinance share of applications increased to 64.0 percent from 61.6 percent the previous week.

The seasonally adjusted Purchase Index was unchanged from one week earlier but was down 20 percent from the previous week on an unadjusted basis and was 5 percent lower than during the same week in 2015.  MBA's report pointed out that last year the Fourth of July fell into the prior week's report.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

Applications for FHA-backed loans had a 10.0 percent share of the total, up from 9.5 percent the previous week while the VA share was down from 12.8 percent to 12.1 percent.  The USDA share of activity was unchanged at 0.6 percent.

All mortgage rates declined on both a contract and an effective basis with one product, the conforming 30-year fixed-rate mortgage (FRM) (loan balances $417,000 or less) falling to the lowest level since May 2013.  That rate was 3.60 percent with 0.36 point, down from 3.66 percent with .32 point.

The average contract interest rate for 30-year FRM with jumbo loan balances greater than $417,000 decreased to 3.61 percent from 3.67 percent.  Points increased to 0.32 from 0.24.  

FHA-backed 30-year FRM had an average contract rate of 3.53 percent with 0.32 point.  A week earlier the rate was 3.56 percent with 0.31 point.

The rate for 15-year FRM fell by an average of 8 basis points to 2.88 percent.  Points increased to 0.34 from 0.32.

The hybrid 5/1 adjustable rate mortgage (ARM) had an average contract interest rate of 2.78 percent, down 7 basis points from the previous week, while points declined from 0.26 to 0.25.  The ARM share of activity decreased to 5.2 percent of total applications from 5.6 percent

MBA's application data is derived from its Weekly Mortgage Application Survey which covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate data presumes a loan with an 80 percent loan-to-value ratio and points that include the origination fee.