After two straight weeks of solid refinance-driven growth, mortgage application volume retreated during the week ended February 19. The Mortgage Bankers Association (MBA) said that its Market Composite Index dipped 4.3 percent on a seasonally adjusted basis from the week ended February 12 and was down 12 percent on an unadjusted basis. The week's results included an adjustment to account for a workweek shortened by the President's Day holiday.
Refinancing pulled back 8 percent from the previous week's level and the refinancing share of mortgage applications fell from 64.3 percent to 61.0 percent. This was undoubtedly due to a reversal of previously declining mortgage rates although the MBA's method of accounting for holiday-shortened weeks may also be contributing to the swing.
"Keep in mind that both the weekly mortgage rate readings from both the MBA and Freddie Mac are just that: weekly," notes MND's Matt Graham. He oversees the data collection and publication for MND's own daily mortgage rate index, which is driven primarily by actual lender rate sheets as opposed to survey responses. His numbers show much bigger changes over the past few weeks.
"If you're just looking at the survey-based weekly numbers, the rate spike doesn't look nearly as dramatic, but consumers aren't rushing to lock rates based on changes in the weekly number. They're getting calls from their mortgage professionals letting them know about the lowest rates in more than 2 years AND the fact that these windows of opportunity typically don't last long."
Indeed, MND's daily effective rate was as low as 3.55% on Feb 11th but had risen as high as 3.71% on the week referenced by today's MBA survey. "A 0.16% increase in rates is incredibly significant," says Graham. "That's why rising rates sapped this week's apps numbers even though the MBA only logged a 0.02% increase."
The seasonally adjusted Purchase Index increased 2 percent from one week earlier and was down 4 percent on an unadjusted basis. The unadjusted index was 27 percent higher than the same week one year ago.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
The FHA share of total applications increased to 12.0 percent from 11.5 percent the previous week while the VA share rose to 13.0 percent from 11.7 percent. The USDA share of total applications increased to 0.7 percent from 0.6 percent.
Contract mortgage interest rates increased for the first time since the beginning of 2016 although the uptick in fixed rates was, in most cases, small. Effective rates increased across the board.
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent. Points rose from 0.36 to 0.42.
Jumbo mortgages have benefitted the most from the recent rate declines and their rebound was among the largest last week. The 30-year jumbo FRM (balances over $417,000) saw an average increase of 6 basis points last week to a contract rate of 3.80 percent. Points declined to 0.25 from 0.26.
Thirty-year FRM backed by the FHA had an average rate of 3.72 percent, up from 3.67 percent the previous week. Points increased to 0.45 from 0.34.
The rate for 15-year fixed-rate mortgages increased to 3.12 percent from 3.11 percent. Points were rose to 0.40 from 0.31.
The largest increase in average rates occurred for adjustable rate mortgages (ARMs). The 5/1 ARM jumped to 3.07 percent from 2.92 percent while points eased back to 0.30 from 0.32. The ARM share of application activity decreased to 5.8 percent from 6.7 percent.
MBA data is gathered through its Weekly Mortgage Applications Survey which has been conducted since 1990. The survey covers over 75 percent of all U.S. retail residential mortgage applications with respondents that include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information presumes a loan with an 80 percent loan-to-value ratio and points that include the origination fee.