Refinancing Applications Plunge as Rates Tick Up

Mortgage applications took a significant downturn during the week ended July 22 as mortgage rates moved off of historic lows.  The Mortgage Bankers Association said its Market Composite Index, a measure of that applications volume, plunged 11.2 percent on a seasonally adjusted basis and 11 percent unadjusted from volume during the week ended July 15.

Refinancing was the most seriously affected.  MBA's Refinance Index decreased 15 percent from the previous week and the share of refinancing applications slipped from 64.2 percent to 61.1 percent. 

Applications for purchase mortgages were down less significantly.  The seasonally adjusted Purchase Index decreased 3 percent from one week earlier to the lowest level since last February 2016 and the unadjusted Purchase Index was also 3 percent lower than a week earlier.  The unadjusted Purchase Index remained 12 percent higher than in the corresponding week in 2015.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

The FHA share of total applications increased to 10.1 percent from 9.9 percent, the VA share rose from 11.2 percent to 11.9 percent and the USDA share ticked up to 0.6 percent from 0.5 percent.

Average interest rates for all mortgage products rose during the week on both a contract and an effective basis.  The average contract rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $417,000 or less increased to 3.69 percent from 3.65 percent.  Points were unchanged at 0.36.

The jumbo version of the 30-year FRM, those with mortgage balances greater than $417,000, had a contract rate of 3.67 percent compared to 3.66 percent a week earlier.  Points were unchanged at 0.32.

Thirty-year FRM backed by the FHA had a rate of 3.56 percent.  This was a 3 basis point increase from the previous week and points were also up, from 0.30 to 0.35.

The rate for 15-year FRM was 2.94 percent with 0.32 point.  The previous week the rate was 2.90 with 0.31 point.

The percentage of applications for adjustable rate mortgages (ARMs) fell during the week, from 5.1 to 4.7 percent, matching the previous low ARM share reached in April 2015.  The average contract interest rate for 5/1 ARMs increased to 2.96 percent from 2.86 percent, with points increasing to 0.30 from 0.29.

MBA's application and rate data is derived from its Weekly Mortgage Application Survey which covers over 75 percent of all U.S. retail residential mortgage applications.  Survey respondents include mortgage bankers, commercial banks and thrifts. The survey has been conducted since 1990.

Base period and value for all indexes is March 16, 1990=100 and interest rate data is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.