Mortgage rates increased last week. Mortgage application activity, however, did not. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, declined 11.9 percent on a seasonally adjusted basis during the week ended October 18 and was 12 percent lower than the previous week on an unadjusted basis.
The higher rate of applications during much of the last year has been largely fueled by refinancing which has driven the frequent reversals as well. Purchase applications have moved up and down, but movements have been much shallower, seldom exceeding 5 percent in either direction. That was true last week as well. The Refinancing Index was down 17 percent compared to the previous week although it remained 126 percent higher than during the same week in 2018. The Purchase Index was down 4 percent on both an adjusted and an unadjusted basis compared with the prior week and was 6 percent higher on an annual basis. The share of refinancing applications was also down, slipping from 62.2 percent to 58.5 percent.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
"Interest rates continue to be volatile, with Brexit votes and ongoing trade negotiations swinging rates higher or lower on any given day. Last week, mortgage rates jumped 10 basis points and were above 4 percent for the first time since September," said Mike Fratantoni, MBA Senior Vice President and Chief Economist. "The increase in mortgage rates caused refinance applications to drop 17 percent, and by more than 20 percent for conventional loans. Borrowers with larger loans are the most sensitive to rate changes, and with rates climbing higher last week, the average size of a refinance loan application fell to its lowest level this year."
Added Fratantoni, "Although purchase applications declined, application volume is still running about 6 percent ahead of this time last year. Low mortgage rates continue to fuel buyer interest, but supply and affordability challenges persist."
The FHA share of total applications increased to 12.1 percent from 11.3 percent the prior week and the VA share of total applications rose to 13.5 percent from 12.9 percent. Applications for USDA mortgages accounted for an 0.5 percent share, up from 0.4 percent the previous week. The average size of a refinance loan was $300,700. The average balance of a purchase loans was $329,700.
Fixed rate mortgages (FMR) saw their rates increase on both a contract and an effective basis. The average contract interest rate for 30-year FRM with loan balances at or below the conforming limit of $484,350 increased to 4.02 percent from 3.92 percent. Points rose to 0.38 from 0.35. The jumbo version of the 30-year FRM, (loans with balances greater than $484,350) increased to 3.96 percent from 3.90 percent, with points increasing to 0.30 from 0.23.
Thirty-year FRM backed by the FHA had an average rate of 3.79 percent with 0.26 point. The prior week the rate was 3.77 percent, with 0.19 point.
The average contract interest rate for 15-year FRM increased 6 basis points to 3.39 percent. Points grew to 0.35 from 0.31.
The contract interest rate for 5/1 adjustable rate mortgages (ARMs) decreased to 3.29 percent from 3.37 percent. Points increased to 0.35 from 0.23 and the effective rate declined. The ARM share of activity decreased to 4.8 percent of total applications from 5.5 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.
