Mortgage activity showed no signs of settling down from its rather wild and wooly behavior since the first of the year.  Data from the Mortgage Bankers Association (MBA) was all over the place during the week ended January 30, apparently because of the new lower annual rates for FHA loans that went into effect during the week.  Shares of applications shifted toward FHA loans and the outliers were in the non-adjusted data. 

The MBA's seasonally adjusted Market Composite Index, a measure of mortgage application volume, increased a slight 1.3 percent during the week ended January 30.  However, on an unadjusted basis that index was 15 percent higher than the week before.

Refinancing, which had been the primary driver of earlier index swings rose 3 percent compared to the week ended January 23.

Refinance Index vs 30 Yr Fixed

The seasonally adjusted Purchase Index was actually down, losing 2 percent but the unadjusted Purchase Index increased 16 percent week-over-week and was 3 percent higher than during the same week in 2014.

Purchase Index vs 30 Yr Fixed

Lynn Fisher, MBA's Vice President of Research and Economics said, "Following several weeks of already elevated refinance activity due to falling interest rates, FHA refinance applications increased 76.5 percent in response to a reduction in annual mortgage insurance premiums which took effect January 26.   Conventional refinance volume was up only 0.5 percent for the week while VA refinance volume was down 24.3 percent. FHA purchase applications were also up 12.4 percent over the week prior, despite a decrease in purchase applications in the rest of the market."

The refinance share of mortgage activity decreased to 71 percent of total applications from 72 percent the previous week while the FHA share, buoyed by premium decreases, increased to 13.1 percent from 9.1 percent.   The VA share mortgage applications decreased to 8.5 percent this week from 10.7 percent last week and USDA guaranteed mortgages lost 1 basis point to a 0.6 percent share.

"Both FHA and VA rates have essentially been pushed against the lower bound of 3.25% and haven't had the same sort of relative improvement as conventional rates," notes Mortgage News Daily's Matt Graham.  "FHA was able to benefit from the MIP changes but VA, of course, was not."

Although the activity was more subdued on the interest rate front, those too were a bit mixed with two products reaching recent lows and another rising slightly.  The 30-year fixed-rate mortgage (FRM) with conforming balances of $417,000 or less was at its lowest level since May 2013 at 3.79 percent with 0.19 point, and with a lower effective rate.   The rate had been 3.83 percent with 0.26 point the previous week.

The average contract interest rate for jumbo 30-year FRM (balances greater than $417,000) was also back to May 2013 levels, falling by 5 basis points to 3.82 percent.  Points decreased to 0.22 from 0.33 and the effective rate decreased from the previous week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.69 percent from 3.71 percent, with points remaining unchanged at 0.07.  The effective rate also decreased.

Fifteen-year FRM had an average contract rate of 3.14 percent, down 1 basis point from the previous week while points increased to 0.31 from 0.28.  The effective rate was unchanged.

The rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.03 percent from 2.96 percent, with points decreasing to 0.39 from 0.42 and the effective rate rose.   The ARM share of application activity decreased to 5.3 percent of total applications from 5.7 percent the week before.

Data on applications and rates is gathered by MBA from its Weekly Mortgage Application Survey which has been conducted since 1990 and covers over 75 percent of all U.S. retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.and interest rates assume a mortgage with an 80 percent loan to value ration and points that include the origination fee.