The volume of mortgage applications rebounded sharply last week as homeowners rushed to refinance in response to another drop in mortgage rates. The Mortgage Bankers Association (MBA) said its seasonally adjusted Market Composite Index, a measure of that volume jumped 8.1 percent during the week ended September 27, recovering from a 10.1 percent decline the prior week. The unadjusted index rose 8.0 percent.
The Refinance Index increased 14 percent from the previous week and was 133 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 58.0 percent of total applications from 54.9 percent the previous week.
Both the adjusted and the unadjusted Purchase Indices rose 1 percent from the previous week. The unadjusted Purchase Index was 10 percent higher than the same week one year ago.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
"Mortgage rates mostly decreased last week, with the 30-year fixed rate dropping below 4 percent for the sixth time in the past nine weeks. Borrowers responded to these lower rates, leading to a 14 percent increase in refinance applications," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Although refinance activity slowed in September compared to August, the months together were the strongest since October 2016. The slight changes in rates are still causing large swings in refinance volume, and we expect this sensitivity to persist."
Added Kan, "Purchase applications also increased and remained more than 9 percent higher than a year ago. Low rates and healthy housing market fundamentals continue to support solid levels of purchase activity."
The FHA share of total applications decreased to 10.4 percent from 11.4 percent the week the previous week and the VA share dropped to 12.4 percent from 13.1 percent. Applications for USDA loans accounted for 0.5 percent of the total. The average loan balance was $326,700 and purchase mortgage balances averaged $328,900.
Both the contract and the effective rates declined from the previous week for all fixed-rate 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 decreased to 3.99 percent from 4.02 percent. Points were unchanged at 0.38.
The average contract interest rate for jumbo 30-year FRM, loans with balances greater than the conforming limit, dipped 2 basis points to 3.98 percent. Points increased to 0.28 from 0.26.
The average contract interest rate for 30-year FRM backed by the FHA decreased to 3.79 percent from 3.90 percent. Points were unchanged at 0.23.
Fifteen-year FRM had an average contract rate of 3.43 percent with 0.37 point. The rate during the week ended September 20 was 3.46 percent with 0.36 point.
Both the contract and the effective rate for 5/1 adjustable rate mortgages (ARMs) moved higher. The contract average was 3.42 percent with 0.37 point compared to 3.39 percent with 0.29 point the prior week. The ARM share of activity increased to 5.5 percent of total applications from 5.1 percent.
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.