Mortgage applications increase on larger-than-expected drop in rates
There was a huge rise in mortgage refinance application activity due to the large drop in interest rates following last week's Federal Open Market Committee meeting.
The Mortgage Bankers Association's Weekly Mortgage Applications Survey for the period ending March 22 reported an 8.9% increase in the overall index from one week earlier.
"The spring buying season is off to a strong start. Thanks to an unexpectedly large drop in mortgage rates following last week's FOMC meeting, purchase applications jumped 6% and refinance applications surged over 12%," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release.
The FOMC reduced its projection of short-term rate increases for 2019 to zero and announced plans to reinvest its mortgage-backed securities holdings into Treasuries.
While the seasonally adjusted purchase index increased 6% from one week earlier, the unadjusted purchase index increased 7% compared with the previous week and was 4% higher than the same week one year ago.
The refinance share of mortgage activity increased to 40.4% of total applications from 39.2% the previous week.
Adjustable-rate loan activity increased to 7.8% from 7.2% of total applications, while the share of Federal Housing Administration-insured loans decreased to 9.3% from 10.4% the week prior.
The share of applications for Veterans Affairs-guaranteed loans to 10.4% from 10.6% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.6% the week prior.
"Rates dropped across all loan types, and the 30-year fixed-rate mortgage is now more than 70 basis points below last November's peak," Kan said. "The average loan size increased once again to new highs for both purchase and refinance loans, as borrowers with — or seeking — larger loans tend to be more reactive to the drop in rates."
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased 10 basis points to 4.45%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate decreased 2 basis points to 4.35%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 11 basis points to 4.48%. For 15-year fixed-rate mortgages, the average decreased 10 basis points to 3.87%. The average contract interest rate for 5/1 ARMs decreased to 3.77% from 3.99%.