Mortgage applications jump 5% on low mortgage rates

Low interest rates drove an increase in mortgage applications in the last week. According to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey, applications rose 5% from last week.

This means on a seasonally adjusted basis, the index grew by 5% for the week ending on Jan. 31, 2020.

According to the MBA, the Market Composite Index, a measure of mortgage loan application volume, now sits at its highest level since May 2013.

On an unadjusted basis, the index grew 20% compared to the previous week.

Joel Kan, the associate vice president of economic and industry forecasting at MBA, said the 10-year Treasury yield dropped nearly 20 basis points last week, as economic concerns over the Chinese coronavirus continued to spread, leading to an increase in refinance applications.

“This drove mortgage rates lower, with the 30-year fixed-rate decreasing for the fifth time in six weeks to 3.71%, its lowest level since October 2016,” Kan said. “Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates.”

According to the organization, the Refinance Index spiked by 15% from a week ago, landing the highest level since June 2013. The seasonally adjusted Purchase Index fell by 10% and the unadjusted Purchase Index increased by 8%.

The Refinance Index was also a whopping 183% higher than the same week last year, while the unadjusted Purchase Index was 11% higher than the same week last year.

In fact, the refinance share of mortgage activity increased to 64.5% of all mortgage applications compared to last week’s 60.4%.

“Prospective buyers weren’t as responsive to the decline in mortgage rates – likely because of suppressed supply levels,” Kan said. “Purchase applications took a step back, but still remained 7.7% higher than a year ago.”

Here is a more detailed breakdown of this week’s mortgage application data:

  • The adjustable-rate mortgage share of activity increased to 5.9% of total applications.
  • The Federal Housing Administration’s share of mortgage apps moved backward to 9.6% from last week’s 10.7%.
  • The Department of Veterans Affairs share of applications fell to 10.2% from last week’s 11.7%.
  • The Department of Agriculture’s share of total applications retreated from last week’s 0.5% to 0.4%.
  • Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71% from the previous week’s 3.81%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) declined to 3.7% from 3.78% one week before.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.8% from 3.82% the prior week.
  • The average contract interest rate for 15-year fixed-rate mortgages fell to 3.19 from last week’s 3.24%.
  • The average contract interest rate for 5/1 ARMs increased from last week’s 3.15% to 3.23%

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