Mortgage application increase led by higher refinance volume

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Mortgage applications increased last week but unlike the prior period, it was driven by refinance volume as interest rates fell to a one-year low, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending March 15 found that total application volume was up by 1.6%, with the refinance index increasing 4% from one week earlier.

The refinance share of mortgage activity increased to 39.2% of total applications from 38.6% the previous week.

"Mortgage rates declined once again, as concerns about the slowing global economy and status of Brexit continued to drive investors' demand for U.S. Treasuries, ultimately pushing yields lower," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release.

The 10-year Treasury yield, which is a benchmark for the 30-year fixed-rate mortgage, was at 2.76% on March 3. But it dropped 16 basis points by March 12 to 2.6%.

"Rates for most loan types were at their lowest levels in over a year, with the 30-year fixed mortgage rate falling to 4.55% — its lowest reading since last February," Kan said. "Although lower rates sparked a 3.5% increase in refinance applications, purchase activity was up only slightly last week and from a year ago."

The seasonally adjusted purchase index increased 0.3% from one week earlier, while the unadjusted purchase index increased 1% compared with the previous week and was 1% higher than the same week one year ago.

"Entry-level housing supply remains weak and is likely hindering some would-be first-time buyers from finding a home. This — along with faster growth in the higher price tiers — is why the average loan application size has risen to a new high for three straight weeks," Kan said.

Adjustable-rate loan activity decreased to 7.1% from 7.2% of total applications, while the share of Federal Housing Administration-insured loans remained unchanged from 10.4% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 10.6% from 10.2% and the U.S. Department of Agriculture/Rural Development share 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 9 basis points to 4.55%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate decreased 8 basis points to 4.37%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 2 basis points to 4.59%. For 15-year fixed-rate mortgages, the average decreased 5 basis points to 3.97%. The average contract interest rate for 5/1 ARMs decreased 10 basis points to 3.99%.

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Mortgage applications Purchase Refinance Mortgage rates Mortgage Bankers Association FHA The VA