Borrowers
have apparently been paying attention.
The 22-basis point drop in mortgage rates per Freddie Mac, the largest
one-week decline in more than 10 years, triggered a surge in mortgage
applications last week, especially for refinancing.
The
Mortgage Bankers Association (MBA) said its Market Composite Index, a measure
of loan application volume, jumped 18.6 percent on a seasonally adjusted basis
during the week ended March 29 and was 18.0 percent higher on an unadjusted
basis.
The response
from those seeking to refinance was especially strong, returning to levels not
seen for several years. The Refinancing
Index jumped 39 percent compared to the previous week and was at its highest
rate since January 2016 while the share of applications for refinancing was
47.4 percent, the largest since January 2018. The share a week earlier was 40.4 percent.
Purchase
mortgage applications also moved higher, although with much less enthusiasm to
the drop in rates. MBA said its
seasonally adjusted Purchase Index was up 3 percent compared to the week ended
March 22 and was up 4 percent on a non-seasonally adjusted basis. Purchasing
was 10 percent higher than during the same week in 2018.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
Joel
Kan, MBA's Associate Vice President of Economic and Industry Forecasting said, "There
was a tremendous surge in overall applications activity, as mortgage rates fell
for the fourth week in a row - with rates for some loan types reaching their
lowest levels since January 2018. Refinance borrowers with larger loan balances
continue to benefit, as we saw another sizeable increase in the average
refinance loan size to $438,900 - a new survey record," said. "We had expected
factors such as the ongoing strong job market and favorable demographics to
help lift purchase activity this year, and the further decline in rates is
providing another tailwind. Purchase applications were almost 10 percent higher
than a year ago."
Added Kan, "The
average loan size for purchase loans declined slightly, (to $330,200 from
$335,900) as applications for smaller purchase loan sizes exceeded that of
higher loan sizes - a positive sign that first-time buyers were increasingly
active in the market."
The FHA share of total applications continue to
decline, representing 8.8 percent of the total compared to 9.3 percent the
previous week. VA applications accounted for 10.4 percent of the total and the
USDA for 0.6 percent, both unchanged from the previous week.
The
significant drop in interest rates affected the contract rates for all fixed
rate products and the effective rate for each declined as well. The contract interest rate for 30-year
fixed-rate mortgages (FRMs) with conforming loan balances at or below the
current limit of $484,350, decreased to an average of 4.36 percent from 4.45
percent, with points increasing to 0.44 from 0.39.
Thirty-year
jumbo FRM, loans with balances higher than the conforming rate, had an average contract
rate of 4.21 percent, down from 4.35 percent. Points declined to 0.25 from
0.27.
Rates
for FHA backed 30-year FRM had an average drop of 7 basis points in the
contract rate to 4.41 percent. Points
were unchanged at 0.48.
The
rate for 15-year fixed-rate mortgages was 3.78 with 0.40 point. The previous week the rate was 3.87 percent
with 0.47 point.
The
average contract interest rate for 5/1 adjustable rate mortgages (ARMs) was unchanged
at 3.77 percent, with points
increasing to 0.38 from 0.30 and the effective rate was higher. The ARM share of activity jumped from 7.8
percent to 9.5 percent, the largest share since Mortgage News Daily started
tracking it in the fourth quarter of 2013.
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.