Lower Rates Boost Refi Volume

The volume of mortgage applications dipped slightly during the week ended December 17, the second consecutive decline. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, declined by 0.6 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index was down 1 percent compared with the previous week.

The Refinance Index increased 2 percent from the previous week and was 42 percent lower than the same week one year ago. The refinance share of mortgage activity increased to 65.2 percent of total applications from 63.3 percent the previous week.

The seasonally adjusted Purchase Index fell 3 percent and was down 6 percent on an unadjusted basis. The volume was 9 percent lower than the same week one year ago.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting, said "Mortgage applications fell last week, driven by a 3 percent decline in purchase applications. Both conventional and government purchase applications were down, while the average purchase loan increased for the second straight week to $416,200 - the second highest amount ever. The elevated loan size is an indication that activity is more on the higher end of the market," he said. "Home-price appreciation growth remains faster than historical averages and inventory, particularly for starter homes, continues to trail strong demand."   

He added, "The 30-year fixed rate decreased to 3.27 percent - its lowest level in four weeks - and helped spur an increase in refinances across all loan types. FHA and VA refinances jumped 4 percent and 12 percent, respectively." 

The FHA share of total applications was unchanged at 9.6 percent while the VA share increased to 11.5 percent from 10.6 percent the prior week, and the USDA share of total applications decreased to 0.4 percent from 0.5 percent. The average origination balance of a loan increased from $341,100 to $348,200 while purchase loans grew to $416,200 from $406,800.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming loan limit of $548,250 decreased to 3.27 percent from 3.30 percent a week earlier. Points increased to 0.41 from 0.39 and the effective rate was 3.39 percent.   

Jumbo 30-year FRM, loans with balances that exceed the conforming limit, had a rate of 3.31 percent with 0.27 point. The prior week the rate was 3.32 percent with 0.30 point. The effective rate dipped to 3.39 percent.

The rate for 30-year FHA backed FRM decreased to 3.34 percent from 3.37 percent, with points increasing to 0.36 from 0.34. The effective rate declined to 3.44 percent.

The average contract interest rate for 15-year FRM increased 1 basis point to 2.59 percent while points decreased to 0.32 from 0.34. The effective rate rose to 2.67 percent.

The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased to 2.79 percent from 2.75 percent, with points unchanged at 0.28. The effective rate increased to 2.90 percent. The ARM share of applications was unchanged from the prior week at 3.4 percent. 

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.

MBS's offices will close for the holidays, reopening on Monday, January 3, 2022. Data on application volume for the weeks ended December 24 and December 31 will be released on January 5.