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MBA: Global economic tension likely responsible for this week’s decline in purchase applications

Market Composite Index falls 3.1%

Are American borrowers becoming sensitive to the nation’s ongoing trade war? The Mortgage Bankers Association’s weekly Mortgage Applications Survey indicates that may be the case, as the demand for purchase applications slowed last week in the midst mounting trade tensions.  

According to the MBA’s survey, for the week ending Aug. 30, 2019, mortgage applications fell by 3.1% on a seasonally adjusted basis from last week.

On an unadjusted basis, the Market Composite Index, a measure of mortgage loan application volume, fell 3.1% compared with the previous week.

“Ongoing trade tensions between the U.S. and China led to volatile, yet declining Treasury rates last week, causing the 30-year fixed mortgage rate to fall to 3.87%, its lowest level since November 2016,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Despite lower borrowing costs, refinances were down from its recent peak two weeks ago, but still remained over 150% higher than last August, when rates were almost a percentage point higher.”

“Purchase applications increased 1% last week and were 5% higher than a year ago,” Kan said. “Consumers continue to act on these lower rates, but the volatility in the market is likely leading some borrowers to pause refinancing and buying decisions.”

The Refinance Index decreased 7% from the previous week, but now sits 152% higher than the same time period in 2018. The unadjusted Purchase Index grew 1% from a week ago and remained 5% higher than the same week a year ago. The seasonally adjusted Purchase Index increased 4% from the week before.

Here’s a more detailed breakdown of this week’s mortgage application data:

  • The refinance share of mortgage activity decreased to 60.4% from last week’s 62.4%.
  • The adjustable-rate mortgage share of activity fell to 5.7% of total applications.
  • The Federal Housing Administration‘s share of mortgage apps retreated to 10.2 from last week’s 10.5%.
  • The Department of Veterans Affairs‘ share of applications moved forward to 11.3% from last week’s 9.9%.
  • The Department of Agriculture‘s share of total applications grew from last week’s 0.5% to 0.6%.
  • Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased from last week’s rate of 3.87% to 3.94%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) increased to 3.94% from last week’s 3.89%.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA held steady from last week’s average of 3.8%.
  • The average contract interest rate for 15-year fixed-rate mortgages declined from last week’s 3.31% to 3.29%.
  • The average contract interest rate for 5/1 ARMs slightly decreased to 3.29% from last week’s 3.31%.

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