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MBA: Mortgage applications start year off strong, surge 21.3%

Purchase apps hit second-highest level in five years

Mortgage applications shrugged off last week’s decline and jumped 21.3% from one week earlier, according to the Mortgage Bankers Association survey for the week ending Jan. 8.

It’s important to note that the previous week’s results included an adjustment for the New Year’s holiday.

The refinance index increased 24% from the previous week, while the seasonally adjusted purchase index increased 18% from one week earlier.

“MBA’s purchase mortgage application index reached its second-highest level since May 2010 on a seasonally adjusted basis last week, second only to the week prior to the implementation of the Know Before You Owe rules,” said Lynn Fisher, MBA’s vice president of research and economics.

“Bolstered by strong fourth-quarter growth in jobs and continuing low rates, the results are similar to levels we saw in early December, suggesting that the purchase market’s strong finish to 2015 may be continuing. While refinances also increased on a holiday-adjusted basis, refinance activity was down 38% relative to a year ago when rates dove below 4%,” Fisher continued.

And refinance applications are predicted to continue to trend lower. In a recent report from Black Knight, approximately 5.2 million borrowers could likely both qualify for and benefit from refinancing, but it’s possible that this number will be slashed in half by the end of the year as interest rates rise.

As it stands, the refinance share of mortgage activity increased to 55.8% of total applications from 55.4% the previous week. The adjustable-rate mortgage share of activity increased to 5.1% of total applications.

The Federal Housing Administration share of total applications slightly dipped to 14.4% from 14.6% the week prior. The Veteran Affair’s share of total applications also dropped to 12.2% from 12.9% the week prior. The United States Department of Agriculture share of total applications increased to 0.8% from 0.6% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased from 4.20% to 4.12%.

Similarly, the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) declined to 4.02% from 4.09%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.90% from 3.95%.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.42% from 3.47%, while the average contract interest rate for 5/1 ARMs decreased to 3.14% from 3.19%. 

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