Mortgage application activity gave back much of the previous week's gains as interest rates increased. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 4.1 percent on a seasonally adjusted basis during the week ended February 5 and was down 3 percent before adjustment.

The Refinance Index, which had surged by 11 percent during the last week in January, was down 4 percent last week but was still 46 percent higher than the same week one year ago. The refinancing share of overall activity decreased to 70.2 percent from 71.4 percent the previous week.

The seasonally adjusted Purchase Index dropped 5 percent from one week earlier but was up 2 percent from the prior week and 17 percent year-over-year on an unadjusted basis.  

 

Refi Index vs 30yr Fixed

 

Purchase Index vs 30yr Fixed

 

"Mortgage rates have increased in four of the first six weeks of 2021, with jumbo rates being the only loan type that saw a decline last week. Despite some weekly volatility, Treasury rates have been driven higher by expectations of faster economic growth as the COVID-19 vaccine rollout continues," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "With the 30-year fixed rate increasing to 2.96 percent - a high not seen since last November - refinances declined, and their share of total applications dipped to the lowest level in three months. Government refinance applications did buck the trend and increase, and overall activity was still 46 percent higher than a year ago. Demand for refinances is still very strong this winter." 

Added Kan, "Purchase applications cooled the first week of February, but homebuyers are still very active. Purchase activity was 17 percent higher than last year, and the average purchase loan size continued to increase, reaching another survey high of $402,200, as the higher-priced segment of the market continues to perform well."

The FHA share of total applications increased to 9.5 percent from 9.1 percent the previous week and the VA share grew to 13.3 percent from 12.1 percent. The USDA share was unchanged at 0.4 percent. The average purchase price dipped to $332,400 from $332,100 and the balance of a purchase mortgage grew from $398,600 to $402,200.

The average contract interest rate for 30-year fixed-rate mortgages (FRM) with balances at or below the conforming limit of $548,250 increased to 2.96 percent from 2.92 percent; Points increased to 0.36 from  0.32 and the effective rate increased. 

The rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, declined 1 basis point to 3.11 percent. Points decreased to 0.29 from 0.32 and the effective rate also moved lower.

Thirty-year FRM backed by the FHA had a rate of 2.97 percent with 0.36 point. The prior week the rate was 2.94 percent with 0.29 point. The effective rate increased.  

The rate for 15-year FRM was 2.50 percent, up from 2.44 percent, with points decreasing to 0.29 from 0.32. The effective rate increased from last week.

The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) increased 4 basis points to 2.92 percent and points declined to 0.36 from 0.46, leaving the effective rate unchanged. The ARM share of activity increased to 2.3 percent of total applications.

MBA's Weekly Mortgage Applications Survey has 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.

MBA's latest Forbearance and Call Volume Survey showed that the total number of loans now in forbearance decreased by 3 basis points over the prior week. As of January 31, 5.35 percent of servicers' portfolios were in active plans, down from  5.38 percent a week earlier and equating to an estimated total of 2.7 million homeowners. By stage, 16.52 percent of forborne loans are in their initial plan stage, while 80.98 are in a forbearance extension. The remaining 2.50 percent are forbearance re-entries. 

The share of Fannie Mae and Freddie Mac loans in forbearance decreased to 3.07 percent - a 3-basis-point improvement. The Ginnie Mae (FHA and VA) share of loans in forbearance decreased 5 basis points to 7.46 percent. The forbearance share for portfolio loans and private-label securities (PLS) decreased by 2 basis points to 9.14 percent. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 4 basis points to 5.73 percent, and those for depository servicers decreased 1 basis point to 5.36 percent.

"The share of loans in forbearance decreased at the end of January across all investor categories. Almost 14 percent of homeowners in forbearance were reported as current on their payments at the end of last month, but the share has declined nearly every month from 28 percent in May," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "While new forbearance requests increased slightly at the end of January, the rate of exits picked up somewhat but remained much lower than in recent months. We are anticipating a sharp increase in exits in March and April as borrowers hit the 12-month expiration of their forbearance plans." 

Fratantoni added, "The job market rebounded slightly in January following a decline in December, but there are still 6.5 percent fewer jobs in the U.S. economy compared to February 2020. The proportion of long-term unemployed also remains troubling, with 4 million people who have been actively looking for work for 27 weeks or more. These are the homeowners who are likely to still be in forbearance and need additional support until the job market recovers to a greater extent."

MBA's latest Forbearance and Call Volume Survey covers the period from January 25 through January 31, 2021 and represents 74 percent of the 37.0 million loans in the servicing market.