Mortgage rates increased last week and in response the volume of applications ratcheted down significantly. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, dropped 6.2 percent on a seasonally adjusted basis during the week ended August 23. On an unadjusted basis the index was 7.0 percent lower than during the week ended August 16.
Most of the decline was due to fewer refinance applications. The Refinance Index decreased 8 percent from the previous week and the refinance share of mortgage activity decreased to 62.4 percent of total applications from 62.7 percent the previous week. Refinancing activity remains elevated, however. The index remains 167 percent above its level during the same week in 2018.
The seasonally adjusted Purchase Index decreased 4.0 and the unadjusted index was down 6.0 percent compared with the previous week. The Purchase Index has declined for six of the last seven weeks. Still, the unadjusted version remains 2 percent higher than the same week one year ago.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
"U.S. Treasury yields were volatile over the course of the week, as the ongoing trade dispute between the U.S. and China continued to generate uncertainty among investors," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Rates increased for the first time since the week of July 12 but were still 80 basis points lower than the beginning of the year," "With rates edging higher, refinances and purchase applications fell, at 8 percent and 6 percent, respectively."
Added Kan, "Purchase applications were still up around 2 percent year-over-year last week, but the drop in rates this summer have not yet led to a significant boost in activity. Uncertainty over the near-term economic outlook and low supply continue to be the predominant headwinds for prospective homebuyers."
The average size of a loan during the week was $339,500. Purchase loans averaged $326,600.
The FHA share of total applications increased to 10.5 percent from 9.7 percent the previous week and the VA share declined to 9.9 percent from 11.6 percent. USDA applications accounted for 0.5 percent of the total, the same as a week earlier.
Interest rates moved higher on both a contract and an effective basis for all loan products except those guaranteed by FHA. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $484,350 increased to 3.94 percent from 3.90 percent and points grew to 0.38 from 0.35.
The average contract interest rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, increased 1 basis point to 3.89 percent. Points ticked up to 0.26 from 0.24.
The 30-year FRM backed by the FHA had an average rate of 3.80 percent with 0.33 point. This was down from 3.87 percent, with 0.32 point the previous week. The effective rate moved lower.
There was a 1 basis point increase in the average rate for 15-year FRM to 3.31 percent. Points were unchanged at 0.33.
The rate for 5/1 adjustable rate mortgages (ARMs) jumped to 3.42 percent from 3.35 percent, while points decreased to 0.39 from 0.41. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1 percent of total applications from a 6.4 share the prior week..
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.
