Mortgage application volume rises as refinancings perk up
Mortgage application activity increased from the prior week, driven by strong refinance volume after a 35-basis-point drop in conforming loan interest rates, according to the Mortgage Bankers Association.
However, purchase application volume slipped on an annual basis for the second consecutive week, as the coronavirus is taking a toll on home sales.
The MBA's Weekly Mortgage Applications Survey for the week ending March 27 found that on a seasonally adjusted basis, overall activity increased 15.3% from the prior seven day period.
The refinance index, which is not adjusted, increased 26% from the previous week and was 168% higher than the same week one year ago. The refinance share of mortgage activity increased to 75.9% of total applications from 69.3% the previous week.
"Mortgage rates and applications continue to experience significant volatility from the economic and financial market uncertainty caused by the coronavirus crisis. After two weeks of sizeable increases, mortgage rates dropped back to the lowest level in the MBA's survey, which in turn led to a 25% jump in refinance applications," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The bleaker economic outlook, along with the first wave of realized job losses reported in last week's unemployment claims numbers, likely caused potential homebuyers to pull back. Purchase applications were down, and after double-digit annual growth to start 2020, activity has fallen off last year's pace for two straight weeks."
The seasonally adjusted purchase index decreased 11% from one week earlier, while the unadjusted purchase index decreased 10% compared with the previous week and was 24% lower than the same week one year ago.
"Buyer and seller traffic — and ultimately home purchases — will also likely be slowed this spring by the restrictions ordered in several states on in-person activities," Kan said.
Adjustable-rate mortgage activity decreased to 3.2% from 6.1% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 9.1% from 8.4% the week prior.
The share of applications for Veterans Affairs-guaranteed loans remained unchanged from 12.5% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.4% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.47% from 3.82%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate remained unchanged at 3.84%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.57% from 3.69%. For 15-year fixed-rate mortgages, the average decreased to 3.05% from 3.28%. The average contract interest rate for 5/1 ARMs decreased 3 basis points to 3.35%.