Rates Dropped Last Week, but Application Volumes Fell as Well

News

Despite a decline in
interest rates, mortgage volume took a significant hit during the week ended April
26.  The Mortgage Bankers Association
(MBA) reported that its Market Composite Index and all of its week-over-week
components fell, some for the fourth straight week.

The Composite
Index declined 4.3 percent on a seasonally adjusted basis from one week earlier
and was down 4 percent on an unadjusted basis, continuing a trend begun during
the week ended April 5. The Refinance Index decreased 5 percent from the
previous week and the share of applications that were for refinancing fell to
38.8 percent from 39.4 percent.

The seasonally
adjusted Purchase Index lost 4.0 percent compared to the previous week and 3.0
percent on an unadjusted basis.  The
unadjusted Purchase Index did maintain a 1 percent edge over its level during
the same week in 2018.

 

Refi Index vs 30yr Fixed

 

 

Purchase Index vs 30yr Fixed

 

 

 

“Mortgage rates
were lower last week – with the 30-year fixed rate declining to 4.42 percent –
as concerns over global growth, particularly in Germany, outweighed more
positive domestic news on first quarter GDP growth and business investment,”
said Joel Kan, MBA’s Associate Vice President of Economic and Industry
Forecasting. “Applications to refinance and purchase a home both fell, but
purchase activity still remained slightly above year ago levels. The drop in
refinances were driven by fewer FHA and VA loan applications, which typically
lag the movement of conventional loans.” 

Added Kan, “The
ARM share of applications decreased to 6.2 percent, its lowest share since
August 2018. So far in 2019, we continue to see a preference for 7/1 ARMs,
which account for around 36 percent of all ARM applications, followed by 10/1
and 5/1 ARMs. This is another indication that the few borrowers who choose to
apply for ARM loans are electing to reap the benefit of lower rates, as well as
some rate stability.”

The
FHA share of applications decreased to 9.5 percent from 9.9 percent the previous
week and the VA share declined to 10.9 percent from 11.3 percent. The USDA
share was unchanged at 0.6 percent.

Both the average contract
and effective interest rates
for all loan products were lower than during the
week ended April 19.  The average
contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances
at or below the conforming limit of $484,350 decreased to 4.42 percent from
4.46 percent.  Points increased to 0.46
from 0.44.

The
interest rate for 30-year FRM with jumbo loan balances exceeding the conforming
loan limit decreased to 4.31 percent from 4.35 percent.  Points dipped to 0.23 from 0.25.   

Thirty-year
FRM backed by the FHA had an average rate of 4.39 percent, down 10 basis points
from the previous rate.  Points decreased
to 0.47 from 0.57.

The average contract
interest rate for 15-year FRM was 3.81 percent with 0.40 point.  A week earlier the rate was 3.87 percent,
with 0.44 point.

The
average contract interest rate for 5/1 adjustable rate mortgages (ARMs)
decreased to 3.81 percent from 3.92 percent, with points increasing to 0.54 from 0.28. Applications for ARM
loans accounted for 6.2 percent of the total compared to 6.4 percent 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.

 

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