Rates Dropped Last Week, but Application Volumes Fell as Well

Despite a decline in interest rates, mortgage volume took a significant hit during the week ended April 26.  The Mortgage Bankers Association (MBA) reported that its Market Composite Index and all of its week-over-week components fell, some for the fourth straight week.

The Composite Index declined 4.3 percent on a seasonally adjusted basis from one week earlier and was down 4 percent on an unadjusted basis, continuing a trend begun during the week ended April 5. The Refinance Index decreased 5 percent from the previous week and the share of applications that were for refinancing fell to 38.8 percent from 39.4 percent.

The seasonally adjusted Purchase Index lost 4.0 percent compared to the previous week and 3.0 percent on an unadjusted basis.  The unadjusted Purchase Index did maintain a 1 percent edge over its level during the same week in 2018.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"Mortgage rates were lower last week - with the 30-year fixed rate declining to 4.42 percent - as concerns over global growth, particularly in Germany, outweighed more positive domestic news on first quarter GDP growth and business investment," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Applications to refinance and purchase a home both fell, but purchase activity still remained slightly above year ago levels. The drop in refinances were driven by fewer FHA and VA loan applications, which typically lag the movement of conventional loans." 

Added Kan, "The ARM share of applications decreased to 6.2 percent, its lowest share since August 2018. So far in 2019, we continue to see a preference for 7/1 ARMs, which account for around 36 percent of all ARM applications, followed by 10/1 and 5/1 ARMs. This is another indication that the few borrowers who choose to apply for ARM loans are electing to reap the benefit of lower rates, as well as some rate stability."

The FHA share of applications decreased to 9.5 percent from 9.9 percent the previous week and the VA share declined to 10.9 percent from 11.3 percent. The USDA share was unchanged at 0.6 percent.

Both the average contract and effective interest rates for all loan products were lower than during the week ended April 19.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $484,350 decreased to 4.42 percent from 4.46 percent.  Points increased to 0.46 from 0.44.

The interest rate for 30-year FRM with jumbo loan balances exceeding the conforming loan limit decreased to 4.31 percent from 4.35 percent.  Points dipped to 0.23 from 0.25.   

Thirty-year FRM backed by the FHA had an average rate of 4.39 percent, down 10 basis points from the previous rate.  Points decreased to 0.47 from 0.57.

The average contract interest rate for 15-year FRM was 3.81 percent with 0.40 point.  A week earlier the rate was 3.87 percent, with 0.44 point.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 3.81 percent from 3.92 percent, with points increasing to 0.54 from 0.28. Applications for ARM loans accounted for 6.2 percent of the total compared to 6.4 percent the prior week.

MBA's Weekly Mortgage Applications Survey 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.