Purchase mortgage applications rise to nine-year high

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Purchase mortgage application volume reached its highest level in almost nine years as homebuyers took advantage of what might be a fleeting window for lower interest rates.

The Mortgage Bankers Association's Weekly Mortgage Applications Survey for the week ending Jan. 11 increased 13.5% from the previous week.

The seasonally adjusted purchase index increased 9% from one week earlier to its highest level since April 2010, while the unadjusted purchase index increased 43% compared with the previous week and was 11% higher than the same week one year ago.

The refinance index increased 19% over the prior week. Meanwhile, the refinance share of mortgage activity increased to its highest level since January 2018, 46.8% of total applications, from 45.8% the previous week.

"Uncertainty regarding the government shutdown, slowing global growth, Brexit, a more patient Fed, and a volatile stock market continued to keep rates from increasing," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release. "The spring home buying season is almost upon us, and if rates stay lower, inventory continues to grow, and the job market maintains its strength, we do expect to see a solid spring market. The 11% gain in purchase volume compared to last year is a promising sign."

Adjustable-rate loan activity increased to 9.2% from 8.4% of total applications, while the share of Federal Housing Administration-guaranteed loans increased to 10.9% from 10.3% the week prior.

"Borrowers with larger loans tend to be more responsive to a given drop in mortgage rates, and we are seeing that so far in 2019. Furthermore, borrowers with jumbo loans are also more apt to take adjustable-rate mortgages as opposed to fixed-rate loans. Thus, it is not surprising to see the ARM share at its highest level since 2014," Fratantoni said.

The share of applications for Veterans Affairs-guaranteed loans decreased to 10.4% from 11.6% and the U.S. Department of Agriculture/Rural Development share decreased to 0.5% 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) remain unchanged at 4.74%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate increased 1 basis point to 4.53%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 6 basis points to 4.76%. For 15-year fixed-rate mortgages, the average decreased 3 basis points to 4.13%. The average contract interest rate for 5/1 ARMs increased 3 basis points to 4.08%.