Declining interest rates made for another strong week for mortgage applications.  The Mortgage Bankers Association (MBA) said its Market Composite Index rose 5.2 percent on a seasonally adjusted basis during the week ended October 4..  This was on top of an 8.1 percent increase during the week ended September 27. On an unadjusted basis the index gained 5.0 percent.

Once again it was refinancing that fueled application activity. The Refinance Index was up 10 percent from the previous week and was 163 percent higher than during the corresponding week in 2018.  The share of applications that were for refinancing climbed back above 60 percent for the first time in more than a month, increasing from 58.0 percent of applications to 60.4 percent.

Applications for home purchases remain relatively unaffected by the low interest rates. Both the seasonally adjusted and the unadjusted purchase indices declined by 1.0 percent from the prior week.  The unadjusted Purchase Index was 10 percent higher than during the same week one year ago.


Refi Index vs 30yr Fixed



Purchase Index vs 30yr Fixed



"U.S. Treasury rates moved sharply lower last week, as data showing weakness in the services sector was a sign that slowing economic growth is not confined to the manufacturing sector. This in turn caused a flight to safety by investors, resulting in mortgage rates dropping across the board, with the 30-year fixed rate decreasing nine basis points to 3.9 percent - the lowest level in a month," said Joel Kan, Associate Vice President of Economic and Industry Forecasting. "As seen a few times this year, the large drop in rates caused another surge in refinance applications. The refinance index increased 10 percent to its highest level since late August, with both conventional and government refinances experiencing an upswing."  

Added Kan, "Purchase activity was muted, declining almost 1 percent, but was still 10 percent higher than a year ago. Despite low rates, the cloudier economic outlook and ongoing market uncertainty may be keeping some potential homebuyers away from the market this fall."

The FHA share of total applications dipped to 10.3 percent from 10.4 percent the previous week and the VA share was 12.3 percent compared to 12.4 percent.  The USDA share was unchanged at 0.5 percent. The average size of a mortgage during the week was $328,600 and the size of a mortgage for home purchase was $330,600.

Both contract and effective interest rates declined for all mortgage products. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $484,350 dropped to 3.90 percent from 3.99 percent.  Points decreased to 0.37 from 0.38.  

Jumbo 30-year FRM, loans with balances higher than the conforming limit, also had an average rate of 3.90 percent, down 8 basis points from the prior week. Points were unchanged at 0.28.  

Thirty-year FRM backed by the FHA had a rate of 3.75 percent compared to 3.79 percent the prior week.  Points increased to 0.29 from 0.23.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.35 percent from 3.43 percent, with points decreasing to 0.30 from 0.37.

The 5/1 adjustable rate mortgage (ARM) had an average rate of 3.25 percent with 0.34 point. The previous week the rate was 3.42 percent with 0.37 point. The ARM share of activity decreased to 5.3 percent of total applications from 5.5 percent a week earlier..

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.