Purchase Mortgage Applications Lose Steam as Rates Rise

Purchase mortgage applications, after starting out strong at the beginning of the year, stalled for the third straight time last week, bringing overall activity down. The Mortgage Bankers Association (MBA) reports that its Market Composite Index, a measure of the volume of applications received, had its worst performance since mid-December.  

The index for the week ended February 9 was down 4.1 percent on a seasonally adjusted basis compared to the previous week and declined 2 percent on a non-adjusted basis as the seasonally adjusted index measuring those purchase mortgage applications lost 6 percent compared to the week ended February 2. The unadjusted index was 3 percent lower week-over-week but remained 4 percent higher than during the same period in 2017.  The Refinancing Index last 2 percent, but the overall slowing of activity meant an 0.1 percent uptick in refinancing's share to 46.5 percent.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

The share of applications that were for FHA loans dipped to 10.1 percent from 10.4 percent and the VA share was unchanged from the prior week at 10.1 percent.  The USDA share was 0.8 percent, up from 0.7 percent the previous week.

Contract and effective interest rates on fixed rate loans continued to trend higher, with average rates for several establishing new multi-year highs. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances of $453,100 or less, was at its highest level since January 2014, 4.57 percent, with 0.59 point. The previous week the rate was 4.50 percent with 0.57 point.

Jumbo FRM loans, those with balances above the $453,100 conforming limits, were also back to January 2014 levels. The average rate jumped from 4.47 percent with 0.44 point to 4.55 with 0.47 point.

Loans backed by FHA saw an average increase of seven basis points in the contract rate, to 4.54 percent. Points increased to 0.73 from 0.69.

The average rate for FRM with 15-year terms reached a level last seen in April 2011, 4.00 percent, up from 3.92 percent the previous week. Points were unchanged at 0.65.

As average rates for adjustable-rate mortgages (ARMs) improve, their market share continues to slowly tick up, going from 6.1 to 6.3 percent last week. The average contract interest rate for 5/1 ARMs decreased to 3.74 percent from 3.77 percent, with points decreasing to 0.37 from 0.42. The effective rate also declined.

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