MBA: U.S. refinance demand falls to the lowest level in 2019

Technology

Last week, the 30-year fixed-rate mortgage rose to a high of 4.02%, spurring a significant decline in refinance demand. According to the Mortgage Bankers Association, this resulted in an 11.9% drop in mortgage applications.

The organization indicates that on an unadjusted basis,
the index also fell 11.9% for the week ending on October 18, 2019.

Mike Fratantoni, MBA’s senior vice president and chief economist, said interest rates continue to be volatile, especially 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% for the first time since September,” Fratantoni said. “The increase in mortgage rates caused refinance applications to drop 17% and by more than 20% for conventional loans.”

Fratantoni says 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 in 2019.

The MBA indicates that the nation’s purchasing demand also
weakened as the seasonally adjusted Purchase Index and the unadjusted Purchase
Index both fell 4% from the previous week.

“Although purchase applications declined, application volume is still running about 6% ahead of this time last year,” Fratantoni said. “Low mortgage rates continue to fuel buyer interest, but supply and affordability challenges persist.”

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

The refinance share of mortgage activity decreased to 58.5% from last week’s 62.2%.The adjustable-rate mortgage share of activity fell to 4.8% of total applications.The Federal Housing Administration’s share of mortgage apps grew to 12.1% from last week’s 11.3%.The Department of Veterans Affairs’ share of applications moved forward to 13.5% from last week’s 12.9%.The Department of Agriculture’s share of total applications ticked up from last week’s 0.4% to 0.5%.Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) moved forward from last week’s rate of 3.92% to 4.02%.The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased from last week’s 3.9% to 3.96%.The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose to 3.79% from last week’s 3.77%.The average contract interest rate for 15-year fixed-rate mortgages increased from last week’s 3.32% to 3.39%.The average contract interest rate for 5/1 ARMs retreated to 3.29% from last week’s 3.37%.
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