The Mortgage Bankers Association (MBA) says mortgage application volume slowed significantly last week as Americans prepared for several major holidays. Its Market Composite Index, a measure of mortgage loan application volume, was down on a seasonally adjusted basis during the week ended December 20 by 5.3 percent compared to the previous week and was 6.0 percent lower on a non-adjusted basis.

Purchase and refinance applications contributed about equally to the decline with the Refinance Index and the seasonally adjusted Purchase Index each falling 5.0 percent from the prior week and the non-adjusted Purchase Index off by 7.0 percent. Still, activity remained elevated compared to a year earlier with refinance activity up 128 percent and the non-adjusted Purchase Index maintaining a 5.0 percent annual edge. The refinance share of mortgage activity increased to 62.6 percent of total applications from 62.2 percent during the week ended December 13.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

"The 10-Year Treasury yield increased last week amid signs of stronger homebuilding activity and solid consumer spending, leading to a rise in conventional conforming and jumbo 30-year mortgage rates to just under 4 percent. With this increase, conventional refinance application volume fell 11 percent," said Mike Fratantoni, MBA Senior Vice President and Chief Economist. "Refinance applications for government loans did increase, even though rates on FHA loans picked up. The change in the mix of business has kept the average refinance loan size smaller than we had seen earlier this year."

Added Fratantoni, "We are in the slowest time of the year for the purchase market. Purchase application activity declined after the seasonal adjustment, but still remains about 5 percent ahead of last year's pace. The increase in construction activity will bolster housing inventories, which should be a positive for purchase volumes going into 2020." 

The FHA share of total applications increased to 14.5 percent from 13.7 percent the prior week and the VA share rose from 12.9 percent to 15.2 percent. The USDA share of total applications remained unchanged at 0.5 percent from the week prior.

The average loan size grew from $308,700 to $320,800 while purchase loans averaged $357,700. This was a near $30,000 increase from the prior week.

The interest rate for 30-year fixed-rate mortgages (FRM) with loan balances at or below the conforming limit of $484,350 averaged 3.99 percent, a 1 basis point increase. Points were unchanged at 0.33 and the effective rate increased from the previous week.

Jumbo 30-year FRM, loans with balances exceeding the conforming rate limit, had an average rate of 3.97 percent with 0.25 point. The previous week the rate was 3.96 percent with 0.26 point. The resulting effective rate was unchanged.

The average contract interest rate for 30-year FRM backed by the FHA increased to 3.87 percent from 3.79 percent, with points decreasing to 0.33 from 0. The effective rate moved higher.

The rate for 15-year fixed-rate mortgages ticked down to 3.39 percent from 3.40 percent, with points unchanged at 0.26. The effective rate was also unchanged.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) increased to 3.38 percent from 3.28 percent, with points decreasing to 0.21 from 0.23. The effective rate increased. The adjustable-rate mortgage (ARM) share of activity decreased to 4.1 percent of total applications from 4.6 percent in the previous report.

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.

MBA says its offices will be closed for the remainder of the holidays. There will be no applications data released next week; results for this week and next (weeks ending December 27, 2019 and January 3, 2020) will be released on January 8.