Mortgage Application Volume Explodes into New Year

The first week of the New Year was a good one – no make that a great onern- for mortgage activity with virtually unprecedented increases in mortgagernapplications both for purchase and refinance. rnWhile the figures were partially affected by the resumption of morernnormal business activity following the Christmas holidays, the surge inrnapplications was nonetheless remarkable. rn</p

As context, application volume as measured by the Mortgage BankersrnAssociation’s (MBA’s) Market Composite Index was down 9.1 percent on arnseasonally adjusted basis over the two week holiday period ended January 2 wasrndown 9.1 percent including an adjustment to account for the holiday.  The volume was down 37 percent on anrnunadjusted basis.  </p

Applications for the week ended January 9 more than offset thosernlosses.  MBA said today that the Indexrnsoared 49.1 percent on an adjusted basis and rose an incredible 119 percent on unadjustedrncompared to the previous week.  Thernincrease in the seasonally adjusted index was the largest weekly gain sincernNovember 2008.  </p

The Refinancing Index rose 66 percent to the highest level since Julyrn2013.  The percentage of refinancingrnapplications increased to 71 percent of total applications compared to 65rnpercent the previous week.  </p

Refinance Index vs 30 Yr Fixed</p

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The seasonally adjusted Purchase Index was up 24 percent from the weekrnended January 2, the highest level it has reached since September 2013 whilernthe unadjusted Purchase Index was up 83 percent from the holiday period and 2rnpercent compared to the same week in 2013. </p

Purchase Index vs 30 Yr Fixed</p

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Mike Fratantoni, MBA’s Chief Economist noted that while the economy andrnthe job market still appear to be gaining strength, long term interest ratesrnhave eased because of problems abroad and tumbling oil prices.  </p

“Mortgage rates reached theirrnlowest level since May of 2013,” Fratantoni said, “and refinance applicationrnvolume soared, more than doubling on an unadjusted basis, and up 66 percentrnafter adjusting for the fact that the previous week included the New Year’s holiday. Conventional refinance volume increasedrnto a greater extent than government refinance volume. Applications for largerrnrefinance loans increased more than 4 times relative to the previous week.”   </p

While interest rates were at nearly twornyear lows, other factors got credit for the jump in application volume.</p

“In addition to the drop in rates, andrnnews of improvement in the job market, there was additional positive newsrnfor prospective homebuyers with evidence that credit availability has increasedrnsomewhat, and with FHA’s announcement of a decrease in theirrnmortgage insurance premiums. Purchase application volume increased by almost 24 percent, with stronger growth for conventional applications than for government loans. Purchase application volume was at itsrnhighest level since September 2013, increased on a year over year basis inrnthe aggregate, and notably increased across most loan size categories,rnparticularly for the conforming, middlernof the market loan segments that had been weak for much of the past year. FHA purchasernapplication volume was up by 17 percent for the week on a seasonally adjusted basis.”</p

Fratantoni continued, “The averagernconventional refinance application increased torn$298,700 from $233,500 the prior week. Althoughrnthere was a somewhat smallerrnincrease for government refinancernvolume, VA refinancernapplications increased by 50 percent.rnVA loans tend to be larger than FHA and USDA loans, and hence are more responsivernto a given rate change.”</p

Overall the share of government-backedrnmortgage applications was lower with the FHA share of total applicationsrnrepresenting 7.5 percent of the total during the week compared to 9.3 percentrnin the prior period.  The VA share decreased torn9.7 percent from 10.7 percent and applications for USDA loans dipped to 0.8rnpercent from 0.9 percent.</p

Contract interest rates for all mortgagernproducts saw substantial reductions with fixed rate numbers returning to levelsrnlast seen in May 2013.  Effective ratesrnwere also down.  The average contractrninterest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) decreased to 3.89 percent,rnfrom 4.01 percent,rnwith points decreasing to 0.23rnfrom 0.28   The jumbo 30-year FRM fell 11rnbasis points to 3.88 percent and points decreased to 0.23 from 0.24.</p

The average contract interest rate forrn30-year fixed-rate mortgages backed by the FHA decreased to 3.71 percent with -.05 point from 3.81 percent with -0.03 point. </p

Fifteen-year FRM had an average rate ofrn3.16 percent, down 8 basis points from the previous week.  Points were unchanged at 0.30.  </p

The average contractrninterest rate for 5/1 ARMs decreased to 2.94 percent,rnthe lowest level since October 2014, from 3.19 percent, with pointsrndecreasing to 0.46 from 0.51 and the effective rate decreased from the previousrnweek.  The adjustable-rate mortgage (ARM)rnshare of activity increased to 5.9 percent ofrntotal applications from 4.9rnpercent.</p

MBA’s Weekly Mortgage Applications Surveyrnhas been conducted since 1990 and covers over 75 percent of all U.S. retail residential mortgage applications.  Respondents include mortgage bankers, commercial banks and thrifts. Basernperiod and value for all indexes is March 16,rn1990=100 and interest rates are quoted for loans with an 80 percent loanrnto value ratio.  Points include thernorigination fee.

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