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.