Mortgage Volume Little-Changed Despite Lower Rates

Mortgage applications suffered their third consecutive decline during the week ended February 1.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 2.5 percent on a seasonally adjusted basis from the previous week.  On an unadjusted basis the index was up 12 percent from the week ended January 25. That week's results included an adjustment for the Martin Luther King Jr. Day holiday.

The seasonally adjusted Purchase Index was also down for the third time, falling 5.0 percent from the previous week. On an unadjusted basis the Purchase Index rose by 13 percent and was 2 percent lower than during the same week in 2018.  The Refinance Index managed an 0.3 percent gain although the share of refinancing applications dropped from 42.0 percent to 41.6 percent.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

Joel Kan, MBA's Associate Vice President of Industry Surveys and Forecasts noted that mortgage rates for all loan types fell back during the week.  The 30-year fixed-rate mortgage (FRM) dropped by seven basis to 4.69 percent - the lowest rate since April 2018.  "Despite more favorable borrowing costs, and after a three-week surge in activity, purchase applications have slowed over the past two weeks, and are now almost 2 percent lower than a year ago. However, moderating price gains and the strong job market, including evidence of faster wage growth, should help purchase growth going forward," Kan said.

He added, "Refinance applications saw a very slight increase compared to the previous week, despite the broad decline in rates." 

The FHA share of loan applications was unchanged from the previous week at 10.5 percent while the VA share dropped to 10.0 percent from 10.7 percent.  USDA loan applications increased to 0.5 percent from 0.4 percent the previous week, still an unusually small share.  The average loan size was 314,500 and the average purchase mortgage loan was 320,500. Both were larger than the averages a week earlier

Rates, both contract and effective, were down for all loan types. The average contract interest rate for 30-year FRM with origination balances at or below the conforming loan limit of $484,350 or less decreased, as Kan said, to 4.69 percent from 4.76 percent.  Points averaged 0.45 compared to 0.47 a week earlier.   

The average contract interest rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, decreased to 4.50 percent from 4.60 percent.  Points rose to 0.28 from 0.24.  

Rates for 30-year FRM backed by the FHA decreased to 4.70 percent from 4.77 percent.   Points dipped to 0.57 from 0.58.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.11 percent from 4.16 percent and points ticked up to 0.47 from 0.46

The average contract interest rate for 5/1 adjustable rate (ARMs) dropped 10 basis points to 4.04 percent with points unchanged at 0.37. The ARM share of activity decreased to 7.8 percent of total applications from 7.9 percent the previous week.  

MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and covers over 75 percent of all U.S. retail residential 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.