Lowest mortgage rates in over a year drives rise in refi applications
With mortgage rates falling to their lowest level in over a year, refinance volume drove this week's increase in application activity, according to the Mortgage Bankers Association.
The MBA's Weekly Mortgage Applications Survey for the week ending May 17 found that total submissions were up 2.4%, led by the refinance index increasing 8% from the previous week. The refinance share of mortgage activity increased to 40.5% of total applications from 37.9%.
However, the seasonally adjusted purchase index decreased 2% from one week earlier, while the unadjusted purchase index decreased 3% compared with the previous week. But compared with one year ago, it was 7% higher on an unadjusted basis.
"Mortgage rates fell for the fourth straight week, with the 30-year fixed-rate mortgage hitting its lowest level since January 2018, leading to a rebound in refinances," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The refinance index increased 8% to its highest level in over a month, and once again there was an increase in average refinance loan sizes, as borrowers with larger balances responded accordingly to lower rates."
In the current mortgage environment, it is more likely that refi boomlets would happen rather than another full boom, the group's Chief Economist Mike Fratantoni said on May 20 at the MBA's National Secondary Market Conference.
Going forward, "We're keeping a close eye on whether there may be some adverse effects of the ongoing global trade disputes on overall demand. Some potential homebuyers may be delaying their home search until there's more certainty," Kan said.
Adjustable-rate loan activity increased to 6.8% from 6.3% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 9.4% from 10.1% the week prior.
The share of applications for Veterans Affairs-guaranteed loans increased to 11% from 10.6% and the U.S. Department of Agriculture/Rural Development share of total applications remained unchanged from 0.6% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased 7 basis points to 4.33%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate remained unchanged at 4.24%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 2 basis points to 4.34%. For 15-year fixed-rate mortgages, the average remained unchanged at 3.78%. The average contract interest rate for 5/1 ARMs decreased to 3.57% from 3.82%.