Borrower activity continued to pick up last week as interest rates retreated to September levels and mortgage applications extended their recent winning streak. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, increased 1.6 percent on a seasonally adjusted basis during the week ended December 7.  On an unadjusted basis, the Index lost 1 percent from the previous week's level.

The Refinance Index rose 2 percent compared to the week ended November 30, and the share of applications that were for refinancing bettered the previous week's 9 month high of 40.4 percent, rising to 41.5 percent.  The seasonally adjusted Purchase Index increased for the fourth straight week, this time by 3 percent.  The Purchase Index was down by 2 percent on an unadjusted basis compared with the previous week but was 4 percent higher than the same week in 2017.  


Refi Index vs 30yr Fixed



Purchase Index vs 30yr Fixed



"Mortgage rates fell across the board last week, driven by a similar slide in Treasuries. Trade fears dominated investors' concerns for another week, and this was amplified by data released by the U.S. Commerce Department showing a widening trade deficit," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "The 30-year fixed mortgage rate decreased 12 basis points over the week [falling] back below 5 percent, representing the largest single week drop since 2017."

Added Kan, "As a result of these recent rate declines, we saw another weekly increase in refinance applications, along with a rise in the average refinance loan size. Larger loans tend to react more readily for a given change in mortgage rates. Meanwhile, purchase application activity also increased over the week and was up more than three percent compared to a year ago."

The FHA share of total applications increased to 10.8 percent from 10.2 percent the prior week and the VA share rose to 10.2 percent from 10.0 percent.  Applications for USDA loans bounced back to the more typical 0.7 percent level from 0.6 percent the previous week.  The average size of all loans was $292,200, up from $284,200 while purchase loans increased by $10,000 to an average of $308,000.  

Average contract rates for all fixed rate mortgages (FRMs) were at three-month lows and effective rates also declined. The average contract interest rate for 30-year FRM with origination balances at or below the conforming loan limit of $453,100 decreased to 4.96 percent from 5.08 percent.  Points increased to 0.48 from 0.44. 

Thirty-year FRM with jumbo balances above the conforming limit had an average rate of 4.80 percent with 0.33 point.  The prior week the rate was 4.89 percent, with 0.30 point. 

The average rate for 30-year FRM backed by the FHA decreased to 4.97 percent from 5.05 percent. Points fell to 0.55 from 0.62. 

The average rate for 15-year FRM declined by 9 basis points to 4.41 percent. Points decreased to 0.44 from 0.60.

Adjustable rate mortgages (ARMs) also saw increased activity during the week; the share of applications increased to 7.6 percent of the total from 7.2 percent.  The average rate for the 5/1 ARM declined to an average of 4.24 percent with 0.34 point from 4.33 percent with 0.21 point the previous week and the effective rate moved lower.

MBA's Weekly Mortgage Applications Survey has been conducted since 1990 and 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 loans with an 80 percent loan-to-value ratio and points that include the origination fee.