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Mortgage app volume climbs on heels of recent rate drop

Purchase applications accounted for the majority of the uptick last week: MBA

Mortgage rates tumbled downward by nearly 1% last week on the heels of a lackluster jobs report, which helped to spur renewed interest in mortgage loans by potential homebuyers. The uptick in mortgage applications was a welcome change for the struggling housing market, which has been plagued by affordability issues that have kept many would-be buyers on the sidelines.

Overall, mortgage applications increased last week by 5.3% on a seasonally adjusted basis compared to one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The survey, which has been conducted weekly since 1990, covers over 75% of all U.S. retail residential mortgage applications. 

Purchase applications accounted for the majority of the uptick last week, with a seasonally adjusted increase of 8% compared to the week prior.

“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30% – the lowest level in two months,” said Mike Fratantoni, MBA’s SVP and chief economist. “Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8%.”

There was increased demand for government loans in particular, with the Federal Housing Administration (FHA) share of total purchase applications increasing to 12.3% from 12% the week prior. The share of Department of Veterans Affairs (VA) purchase loans also saw an uptick, climbing to 12.8% from 11% week over week.

The U.S. Department of Agriculture’s (USDA) share of total applications saw a slight downturn, however, decreasing to 0.5% from 0.6% the week prior.

Refi app volume a “mixed bag”

On the other hand, refinancing application volume was a “mixed bag” last week, according to the MBA. While total refi app volume was relatively flat, conventional volume declined last week — and the VA refi volume increased.

In addition, the adjustable-rate mortgage (ARM) share of activity decreased to 6% of total applications.

“Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing,” Fratantoni said. “The level of refinance activity remains almost 60 percent below last year, as most homeowners are currently locked in at much lower rates,” Fratantoni said.

This trend has been an ongoing issue for the housing market, as homeowners are hesitant to sell their homes and give up their current 2-3% interest rates. In turn, housing inventory has dwindled month after month — furthering affordability issues and causing the spring buying season to miss its expected burst.

The MBA shows the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.3% from 6.4% last week. Rates on jumbo loan balances (greater than $726,200) decreased to 6.26% from 6.36% on a weekly basis.

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