Declining rates, an impending hurricane, the Blood Moon - who knows what was behind - it but mortgage application volume went a little crazy last week. The Mortgage Bankers Association said its Market Composite Index and all of its components shot through the roof during the week ended October 2.  MBA's Weekly Mortgage Applications Survey data had the seasonally adjusted composite index up 25.5 percent from the previous week while on an unadjusted basis it rose 26 percent. 

The unusual movement was across the board with the Refinancing Index rising 24 percent from the week ended September 25 and the seasonally adjusted Purchase Index up 27 percent.  The unadjusted Purchase Index was also 27 percent higher week-over-week and 49 percent above the level during the same week in 2014.  The refinance share of mortgage activity decreased to 57.4 percent of total applications from 58.0 percent the previous week.

Refinance Index vs 30 Yr Fixed

Purchase Index vs 30 Yr Fixed

"The number of applications for purchase and refinance mortgages soared last week due both to renewed rate volatility and as many applications were filed prior to the TILA-RESPA regulatory change. The average loan size of applications in the weekly survey increased by 6.9 percent, driven by a 12.1 percent increase in the average size of refinances," said Lynn Fisher, MBA's Vice President of Research and Economics.

"When mortgage apps break significantly higher or lower, we tend to see one of the indices leading the charge, but in this case, both refinances and purchases surged by roughly similar percentages," note Mortgage News Daily's Matthew Graham.  "As the MBA correctly notes, the key factors are TRID and rates, but I would add some emphasis and some clarity.  Comments from originators on MBS Live suggest the efforts to beat the TRID implementation deadline were the primary motivation for the increase in purchases--especially considering that the topic has been well publicized amount the Realtor community--and last week's exceptionally low rates motivated the refi numbers.  While the MBA does note a 0.09 decrease in the effective rate week-over-week, the gap between the previous week's rates and those seen on Friday morning is closer to 0.2!  Many borrowers saw conventional 30yr fixed rates as low as 3.625% for the first time since April, and lock/app volume was through the roof."

The FHA share of total applications decreased to 12.7 percent from 13.8 percent and VA applications dipped to a 9.2 percent share from 10.3 percent a week earlier. The USDA share of total applications remained unchanged from 0.7.

Both contract and effective mortgage rates fell on all fixed rate products with some contract rates making significant moves. The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased to 3.99 percent, the lowest level since May 2015, from 4.08 percent.  Points dropped from 0.46 to 0.45.  

The jumbo version of conventional 30-year FRM, loans, with initial balances above $417,000, fell 6 basis points to 3.89 percent, the lowest level since April. Points declined to 0.25 from 0.35. 

The average contract interest rate for 30-year FRM backed by the FHA decreased to 3.80 percent, the lowest level since May 2015, from 3.87 percent.  Points increased to 0.35 from 0.34.

Fifteen-year FRM had an average contract rate of 3.24 percent, the lowest level since May 2015 with 0.38 point.  A week earlier the rate was 3.29 percent with 0.41 point.

Bucking the tide, the average contract interest rate for 5/1 ARMs increased to 2.96 percent from 2.95 percent, with points decreasing to 0.32 from 0.41, but the effective rate still decreased. The adjustable-rate mortgage (ARM) share of activity increased to 7.6 percent of total applications.

MBA's Weekly Mortgage Application Survey, which has been conducted since 1990, covers over 75 percent of all U.S. retail residential mortgage 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 mortgages with an 80 percent loan-to-value ratio with points that include the origination fee.