Mortgage applications record a weekly drop to close out July

Following a one-week jump in mortgage applications driven by elevated refinance activity, volumes edged down again, even as interest rates continued to favor borrowers.

The Mortgage Bankers Association’s Market Composite Index, which tracks applications through a weekly survey of MBA members, declined a seasonally adjusted 1.7% for the period ending July 30. On an unadjusted basis, the decrease equaled 2%. Compared to volumes for the same week in 2020, the seasonally adjusted index was 8.1% lower.

Although low interest rates have frequently led to surges in refinancing activity in 2021, the Refinance Index decreased 2% on a week-over-week basis and came in 3% lower than the same week a year ago.

After dipping to its lowest level since May 2020 the previous week, the Purchase Index slid a further 2%, seasonally adjusted. On an unadjusted basis, purchases were down 2% compared to a week earlier and 18% lower year-over-year.

“Purchase application volume decreased again, reflecting the ongoing lack of inventory that continues to drive rapid home-price appreciation across the country,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a press statement.

Research released this week underscored the effects that scarce housing supply has had on the market and home-buying sentiment. CoreLogic’s data from June showed home prices accelerating to their highest level since 1979, with few signs of cooling off in the near future.

Refinances accounted for 67.6% of the week’s total volume, inching up from 67.5%. The share of adjustable-rate mortgage applications was 3.4%, decreasing from 3.6% a week earlier.

Average mortgage amounts also shrank week-over-week across application types. The average loan was $345,300, a decrease of 3.5% from $357,700 in the prior reporting period. Among refinances, loan sizes averaged $321,900, 3.9% lower than the $335,000 average reported a week earlier. The average size of purchase loans came in at $394,100, down from $404,200 the prior week — a 2.5% drop.

Government-sponsored loan applications grabbed a similar share of volume as they took a week earlier. Federal Housing Authority-backed mortgages accounted for 9% of activity, unchanged from the week before, while the share of applications coming from the Veterans Administration climbed to 9.9% from 9.7%. U.S. Department of Agriculture-backed loans accounted for a 0.5% share, also unchanged from the prior week.

30-year conforming rate falls again
More than a year after the onset of the coronavirus pandemic, concerns about the worldwide spread of COVID-19 continue to impact the mortgage industry, keeping mortgage rates from rising significantly, according to Fratantoni.

“Interest rates drifted lower globally last week, as markets assessed the latest concerns regarding the delta variant. Thirty-year mortgage rates dropped below 3% in our survey for the first time since this February, presenting an opportunity for many homeowners who have not yet refinanced to lower their rate and their payments,” he said.

• The average contract interest rate of 30-year fixed-rate mortgages with conforming loan balances of $548,250 or less fell to 2.97%. A week earlier, the rate sat at 3.01%.

• The contract interest rate of 30-year fixed-rate jumbo loans with balances greater than $548,250 averaged 3.12%, inching up one basis point from 3.11% the prior week.

• The average contract interest rate of FHA-backed 30-year fixed-rate mortgages also increased, up to 3.08% from 3.03% the previous week.

• After declining to its lowest level since the MBA began the survey in 1990, the average contract interest rate of 15-year fixed-rate mortgages decreased even further, falling another three basis points to 2.33% from 2.36% week over week.

• The average of 5/1 adjustable-rate mortgages rose to 2.93%, up from 2.81% a week earlier.