MBA: Purchase demand declines 11% as mortgage rates continue to climb

This week, the Market Composite Index declined by 11%

Several weeks ago, HousingWire asked the question of whether or not borrowers were sensitive to rate changes. Well, this week’s Mortgage Applications Survey suggest they are indeed.

According to the Mortgage Bankers Association, last week’s uptick in mortgage rates, which climbed to the highest level since last October, sent the nation’s purchasing activity in decline by a whopping 10.1%.

This means for the week ending on Sept. 20, 2019, on an unadjusted basis, the index fell 11% from the previous week.

“U.S. Treasury yields trended downward over the course of last week, as the Federal Reserve meeting highlighted the elevated uncertainty in the economic outlook,” MBA Vice President of Economic and Industry Forecasting Joel Kan said. “However, despite falling yields, mortgage rates ticked up again and have risen 20 basis points over the past two weeks.

Ultimately, the increase in rates led to fewer refinances, and activity has now dropped 17% over the last two weeks, said Kan.

Although the Refinance index declined 15% this week, the MBA notes it remains 104% higher than the same time period in 2018.

The unadjusted Purchase Index also decreased, retreating 4% from a week ago, but remaining 9% higher than the same week of 2018. Lastly, the seasonally adjusted Purchase Index retreated 3% from the week before.

“Purchase applications also decreased, likely related to the two-week jump in rates, but still remained 9% higher than last year,” Kan said. “The recent data on increased existing-home sales and new residential construction points to the underlying strength in the purchase market this fall.”

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

  • The refinance share of mortgage activity decreased to 54.9% from last week’s 57.9%.
  • The adjustable-rate mortgage share of activity rose to 5.1% of total applications.
  • The Federal Housing Administration‘s share of mortgage apps moved forward to 11.4% from last week’s 10.9%.
  • The Department of Veterans Affairs‘ share of applications increased to 13.1% from last week’s 12.7%.
  • The Department of Agriculture‘s share of total applications held steady from week’s 0.6%.
  • Mortgage interest rates for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased from last week’s rate of 4.01% to 4.02%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) slid from last week’s 4.01% to 4%.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.9% from last week’s 3.89%.
  • The average contract interest rate for 15-year fixed-rate mortgages rose from last week’s 3.42% to 3.46%.
  • The average contract interest rate for 5/1 ARMs moved backward to 3.39% from last week’s 3.54%.

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