Refinance Applications Near 18-Year Low

Mortgage rates surged significantly during the week ended May 18, sending mortgage activity skidding for the fifth straight week.  The Mortgage Bankers Association (MBA) says its Market Composite Index, a measure of mortgage loan application volume, dropped by 2.6 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis there was a 3 percent decline.

The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week but remained  3 percent higher than the same week in 2017.

Refinance activity hit a near 18-year low. The Refinance Index declined another 4 percent compared to the previous week, to its lowest level since December 2000.  Refinancing also continues to lose market share, accounting for 35.7 percent of applications during the week, down from 35.9 percent the previous week.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

There was an unusual half-point drop in the share of VA mortgage applications, from 10.3 percent the previous week to 9.8 percent.  FHA and USDA participation were unchanged at 10.3 percent and 0.8 percent respectively.

All loan types tracked by MBA had higher interest rates with most rising on both a contract and an effective basis.  All established new multi-year highs.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances fitting into the conforming limit of $453,100 increased to the highest level since April 2011, 4.86 percent, from 4.77 percent. Points increased to 0.52 from  0.50.

The contract rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, was the highest since September 2013, 4.81 percent, up from 4.73 percent.  Points rose to 0.42 from 0.35.

There was an increase of 12 basis points in the contract rate for 30-year FHA-backed FRM, bringing it to its highest level since May 2011, 4.90 percent.  Points rose to 0.85 from 0.76.

The average contract interest rate for 15-year FRM increased to its highest level since February 2011, rising to 4.31 percent with 0.56 point from 4.20 percent with 0.53 point.

The share of applications for adjustable rate mortgages (ARMs) increased to 6.8 percent from 6.5 percent even as the interest rate for 5/1 ARMs hit the highest level in the history of MBA's survey, 4.12 percent. The prior week the rate was 4.09 percent. A decline points from 0.56 to 0.46 points however left the effective rate unchanged.

 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.