"Dovish" FOMC Statement Bolsters Refi Activity

The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of loan application volume, managed a seasonally adjusted 1.3 percent increase during the week ended June 21st as mortgage interest rates continue to drift lower.  The index was up 1 percent from the previous week on an unadjusted basis.

Refinancing remained strong, accounting for 51.5 percent of total applications compared to 50.2 during the week ended June 14.  The Refinance Index increased 3 percent.

The seasonally adjusted Purchase Index lost 1 percent from its previous level and the unadjusted index was down 2 percent.  It remained 9 percent higher than during the same week in 2018.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"Markets last week reacted to a more dovish FOMC statement and forecast, with Treasury yields falling after the meeting. Mortgage rates dropped again for most loan types, which led to an increase in refinance activity, partly driven by a 9 percent jump in VA applications," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The 30-year fixed rate has now dropped in three of the last four weeks, and at 4.06 percent, reached its lowest level since September 2017. Despite these lower rates, purchase applications decreased 2 percent, but were still considerably higher (9 percent) than a year ago."

Added Kan, "Now at almost the half-way mark of 2019, we have generally seen a stronger purchase market than last year, despite still-tight existing inventory and insufficient new construction."

The FHA share of total applications increased to 9.6 percent from 9.4 percent and the VA share was 12.5 percent, up from 11.9 percent the previous week.  The USDA share of total applications increased to 0.6 percent from 0.5 percent.  

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming loan limit of $484,350 decreased to 4.06 percent from 4.14 percent, with points moving to 0.35 from 0.38. The effective rate decreased from last week. 

The rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, decreased by 4 basis points to 4.00 percent.  Points were unchanged at 0.24 and the effective rate moved lower.   

Thirty-year FRM backed by the FHA had an average rate of 4.01 percent with 0.36 point.  The prior week that rate was 4.12 percent, with 0.44 point. The effective rate declined.

The average contract interest rate for 15-year FRM decreased to 3.40 percent from 3.50 percent. Points dipped to 0.31 from 0.33 and the effective rate decreased.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) moved higher, increasing to 3.50 percent from 3.45 percent.  Points jumped to 0.29 from 0.23 and the effective rate increased. The ARM share of applications increased to 6.5 percent from 6.1 percent.

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.