Refi Applications hit Seven-Year Highs on Coronavirus Fears, Lower Rates

Applications for mortgage financing increased again during the week ended February 7 despite a significant decline in those for home purchases. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, rose 1.1 percent on a seasonally adjusted basis from one week earlier and 3 percent on an unadjusted basis.

MBA's Purchase Index dropped by 6 percent on a seasonally adjusted basis compared to the week ended January 31 although it eked out a fractional gain on an unadjusted basis. The unadjusted Purchase Index was, however, 16 percent higher than during the same week in 2019.

Refinancing was up for the third straight week, adding 5 percent to that index which is now 207 percent higher than on an annual basis. The share of applications that were for refinancing grew to 65.5 percent; 1 percentage point higher than the prior week.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"The mortgage market continues to be active in early 2020, as applications increased for the third straight week. Rates also rose, but still remained close to their lowest levels since October 2016," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The refinance index climbed to its highest level since June 2013, and refinance loan sizes also increased as a result of an active jumbo lending market."

The average size of a loan last week was $347,100, up from $342,400 a week earlier while the average purchase loan size was $347,300 compared to $341,400.

Added Kan, "Last month was the strongest January for purchase applications since 2009, which is perhaps a sign that mild weather brought out prospective buyers earlier than normal. Despite a decline last week, purchase activity was still up almost 16 percent from a year ago." 

The FHA share of total applications ticked up to 9.7 percent from 9.6 percent the previous week while the VA share decreased to 10.1 percent from 10.2 percent. USDA's share of applications remained at 0.4 percent.

Rates for fixed rate mortgages were up slightly on a contract basis and most effective rates also moved higher. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at or below the conforming limit of $510,400 increased to 3.72 percent from 3.71 percent, while points were unchanged at 0.28. The effective rate was also unchanged.

The average rate for jumbo 30-year FRM, those with balances exceeding the conforming limit, increased to 3.75 percent from 3.70 percent. Points dipped to 0.17 from 0.19. and the effective rate increased.

The rate for 30-year FRM backed by the FHA increased to 3.84 percent from 3.80 percent. Points were unchanged at 0.26 and the effective rate moved higher.

Fifteen-year FRM had an average rate of 3.20 percent with 0.27 point. The previous week the rate was 3.19 percent with 0.23 point. The effective rate also increased.

Adjustable rate mortgage (ARM) rates moved lower. The average contract interest rate for 5/1 ARMs decreased to 3.21 percent from 3.23 percent, with points decreasing to 0.13 from 0.15 and the effective rate moved lower. The ARM share of activity increased to 6.2 percent of total applications from 5.9 percent a week earlier.

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.