Mortgage applications increase with FHA refinancings as a driver

Mortgage application activity increased 3.8% from one week earlier, with refinance volume for Federal Housing Administration-insured loans taking the spotlight, the Mortgage Bankers Association said.

"The 30-year fixed mortgage rate remained under 4% for the fourth straight week, and rates for FHA loans declined close to their lowest level of the year," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The decrease in FHA rates led to a 27% jump in refinance applications for those loans, and their share of refinance activity — at 14% — was the highest since 2016."

The MBA's Weekly Mortgage Applications Survey for the week ending Dec. 6 found that the refinance index increased 9% from the previous week and was 146% higher than the same week one year ago. The results for the week ending Nov. 29 included an adjustment for the Thanksgiving holiday.

The refinance share of mortgage activity increased to 62.4% of total applications from 59% the previous week.

The total share of Federal Housing Administration-insured loan applications — both purchase and refinance — increased to 13.9% from 12% the week prior.

Purchase volume had a slight setback during week, but Kan remained optimistic for this market going forward.

"Purchase applications were down slightly [on a seasonally adjusted basis], but were 5% higher than a year ago, which is in line with the gradual growth in the purchase market seen throughout this year," said Kan. "The November jobs data showed increased payroll gains and low unemployment, which means conditions remain favorable for steady purchase growth in the coming months."

The seasonally adjusted purchase index decreased 0.4% from one week earlier, while the unadjusted purchase index increased 35% compared with the previous week and was 5% higher than the same week one year ago.

Adjustable-rate mortgage applications had their share increase to 5% from 4.8%.

The share of applications for Veterans Affairs-guaranteed loans decreased to 12.4% from 12.7% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.5% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased 1 basis point to 3.98%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) decreased 1 basis point to 3.9%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 4 basis points to 3.79%. For 15-year fixed-rate mortgages remained, the average remained unchanged at 3.37%. The average contract interest rate for 5/1 ARMs increased to 3.52% from 3.28%.