January 11 ended the first full business week in a while and mortgage activity responded accordingly.  The Mortgage Bankers Association (MBA) reported a strong rebound when, despite a government shutdown, business returned more or less to normal.

MBA's Market Composite Index, a measure of mortgage loan application volume, increased 13.5 percent on a seasonally adjusted basis from the week ended January 4, reaching its highest level since last February.  On an unadjusted basis, the Index was up 45 percent.

Purchase mortgage applications moved higher for the sixth time in the last eight weeks, resuming the upward trajectory that was interrupted by the Christmas holidays. That index was up 9 percent on a seasonally adjusted basis to its highest level since April 2010.  The unadjusted Purchase Index rose 43 percent compared with the previous week and was 11 percent higher than the same week one year ago.

The Refinance Index increased 19 percent from the previous week to its highest level since March 2018. The refinance share of mortgage activity increased to its highest level in a year, 46.8 percent of total applications, from 45.8 percent the previous week.

 

Refi Index vs 30yr Fixed

 

 

Purchase Index vs 30yr Fixed

 

 

In commenting on the improved activity, Mike Fratantoni, MBA Senior Vice President and Chief Economist said, "Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing. The spring homebuying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market. The 11 percent gain in purchase volume compared to last year is a promising sign."

Added Fratantoni, "Borrowers with larger loans tend to be more responsive to a given drop in mortgage rates, and we are seeing that so far in 2019. Furthermore, borrowers with jumbo loans are also more apt to take adjustable-rate mortgages as opposed to fixed-rate loans. Thus, it is not surprising to see the ARM share at its highest level since 2014. These borrowers may also feel more confident taking an adjustable-rate mortgage given the expectation of a more patient Fed."

The average size of loans overall increased by slightly less than $10,000 to $328,100.  Purchase loans ticked up from $300,300 to $306,100, and refinance loans averaged $353,100, a survey high.

Applications for FHA-backed mortgages accounted for 10.9 percent of the total, up from 10.3 percent the previous week and the VA share decreased to 10.4 percent from 11.6 percent. Applications for USDA loans declined from 0.6 percent to 0.5 percent.

Rates were mixed. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or under the new conforming loan limit of $484,350 was unchanged at 4.74 percent.  Points decreased to 0.45 from 0.47 and the effective rate declined.   

The average contract interest rate for 30-year jumbo FRM, loans with balances greater than the conforming limit, ticked up 1 basis point to 4.53 percent.  Points rose to 0.31 from 0.28 and the effective rate moved higher.   

FHA-backed 30-year FRM had an average contract rate of 4.76 percent compared to 4.70 percent the prior week.  Points increased to 0.52 from 0.47 and the effective rate also increased.

Fifteen-year FRM had an average rate of 4.13 percent, its lowest since April, down from 4.16 percent.  Points increased to 0.45 from 0.35, leaving the effective rate unchanged.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 4.08 percent from 4.05 percent, with points unchanged at 0.32. The effective rate increased from last week.  The adjustable-rate mortgage (ARM) share of activity increased to its highest level since October 2014, 9.2 percent of total applications compared to 8.4 percent the previous 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.