Higher Mortgage Rates Didn't Deter Purchase Loan Activity

There was a jump in purchase mortgage applications during the week ended September 14 even as interest rates moved higher.  The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of applications volume, ticked down 0.1 percent on a seasonally adjusted basis, as the increase in its Purchase Index offset a significant decline in refinance activity. The Index was up 10 percent on an unadjusted basis, bouncing back from a 9 percent decline the prior week which was shortened by the Labor Day holiday.

The Purchase Index increased 6 percent on a seasonally adjusted basis, posting its third consecutive week of gains. The unadjusted index was 16 percent higher than the week before and up 15 percent compared to the same week in 2018. The average loan for a purchase mortgage was $327,400.

Applications for refinancing eased back, its index reflected a 4.0 percent decline from the prior week.  But given the surge in refinancing earlier in the year, the Refinancing Index is still 148 percent higher than at the same time in 2018.  The share of total applications that were for refinancing also retreated, decreasing to 57.9 percent from 60.0 percent the previous week.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"The jump in U.S. Treasury rates at the end of last week caused mortgage rates to increase across the board, with the 30-year fixed-rate mortgage climbing to 4.01 percent - the highest in seven weeks," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Refinancing activity dropped as a result, driven solely by conventional refinances."

Added Kan, "The purchase index increased for the third straight week to the highest reading since July. Additionally, the average loan amount on purchase applications increased to its highest level since June. This is a likely a sign that the underlying demand for buying a home remains strong, despite some of the recent volatility we have seen."

The FHA share of total applications increased to 10.9 percent from 9.3 percent the prior week and the VA share rose to 12.7 percent from 11.9 percent.  The USDA share of total applications was 0.5 percent.

Interest rates for all loan types rose on both a contract and an effective basis. The average contract interest rate for 30-year fixed-rate mortgages (FRM) at or below the conforming loan limit of $484,350 increased to 4.01 percent from 3.82 percent, with points decreasing to 0.37 from 0.44.

Jumbo FRM, loans with balances higher than the conforming loan limit, had an average rate of 4.01 percent with 0.29 point.  The previous week the rate was 3.84 percent, with 0.34 point. 

The rate for 30-year FRM backed by the FHA increased to 3.89 percent from 3.76 percent. Points ticked down to 0.30 from 0.31.

Fifteen-year FRM had an average rate of 3.42 percent, up 14 basis point from the week ended September 6. Points decreased to 0.36 from 0.47.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.54 percent from 3.42 percent, with points decreasing to 0.29 from 0.40. The adjustable-rate mortgage (ARM) share of activity fell to 5.0 percent of the total from 5.6 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.