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.