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Mortgage Apps: Down to Four-Year Low, Highest Rates Since 2010

November 6, 2018
by admin

The week ended November 2 was another week of retreat for mortgage applications as the Mortgage Bankers Association’s (MBA’s) Market Composite Index dropped by 4.0 percent on a seasonally adjusted basis. This brought the index to its lowest level since December 2014. The index was down 2.0 percent on an unadjusted basis compared to the previous week.

The Refinance Index decreased 3 percent and the share of applications that were for refinancing shrunk to 39.1 percent from 39.4 percent of the total. Despite fluctuating almost weekly and even with rising interest rates, the share of loans that were for refinancing has declined by only a net of 2 percentage points since the end of July.

The seasonally adjusted Purchase Index declined by 5 percent from one week earlier to the lowest level since November 2016. The unadjusted Purchase Index was down 1 percent compared with the previous week and was 0.2 percent lower than the same week one year ago.

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

The average size of all loans originated during the week was $292,800 and the average size of mortgages for home purchases was $310,700. Both amounts were slightly higher than the previous week.

“Rates increased slightly last week, as various job market indicators showed a bounce back in job gains and an acceleration in wage growth in October. The survey’s 30-year fixed-rate, at 5.15 percent, was the highest since April 2010,” said Joel Kan, MBA’s associate vice president of economic and industry forecasts. “Application activity decreased over the week for both purchase and refinance applications, with the overall market index down to its lowest level since December 2014. The purchase index declined to its lowest level since November 2016 but remained only slightly below the same week a year ago. It’s evident that housing inventory shortages continue to impact prospective homebuyers this fall.”

The FHA share of total applications dipped to 10.1 percent from 10.3 percent while the VA share increased to 10.1 percent from 9.8 percent. The USDA share was unchanged from 0.7 percent.

As Kan said, the average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $453,100 rose to 5.15 percent. During the week ended October 26 it was 5.11 percent. Points increased to 0.51 from 0.50 and the effective rate was higher.

The average contract interest rate for jumbo 30-year FRM, loans with balances exceeding the conforming limit, increased 3 basis points to 4.97 percent. Points dipped to 0.27 from 0.28 and the effective rate moved higher.

Thirty-year FRM backed by the FHA had an average rate of 5.15 percent with 0.64 point. The previous week the rate was 5.08 percent with 0.62 point. The effective rate was also higher.

Both the rate and points for 15-year FRM were unchanged from the prior week at 4.55 percent and 0.51 point. The effective rate was still higher.

The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) was 4.36 percent with 0.35 point. The prior week it was 4.33 percentwith 0.42 point. The effective rate remained at the previous week’s level. Applications for ARMs gained a little ground, rising to 7.8 percent of total applications from 7.6 percent.

MBA’s Weekly Mortgage Applications Survey has 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. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.

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