Mortgage applications fell 1.8% last week despite mortgage rates staying low, according to a report by the Mortgage Bankers Association.
A seasonally adjusted index measuring purchase applications also fell 1% – marking its second week of decline after a two-month growth, the report said. While the refinance index fell 2% last week, refinance applications remained 74% higher than a year ago.
“Investors are contemplating the risks of the recent resurgence of COVID-19 cases to the labor market and economy, and Treasury rates and mortgage rates are moving lower as a result,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
The market composite index, a measure of mortgage loan application volume, also decreased 1.8% on a seasonally adjusted basis from one week earlier, according to the report.
“The weakening in activity is potentially a signal that pent-up demand is starting to wane and that low housing supply is limiting prospective buyers’ options,” said Kan.
The limited supply of housing can be seen in numerous metros across the country, with a recent Clever study finding that 42% of homeowners who made a purchase between January and May this year ended up in a bidding war.
The average purchase application loan size increased to a record high in MBA’s survey, while the 30-year fixed rate has been below the 3.5% mark since late March, Kan said.
According to the report, the MBA believes it is possible that many borrowers have already refinanced or are waiting for rates to go even lower.
Here is a more detailed breakdown of this week’s mortgage application data:
- The FHA’s share of mortgage apps increased to 11.7% from 11.4%.
- The VA share of applications fell to 10.8% from 11%.
- The USDA share of total applications fell to 0.6% from 0.7%
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) fell to 3.29% from 3.3%
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) fell to 3.59% from 3.62%.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.43% from 3.35%.
- The average contract interest rate for 15-year fixed-rate mortgages remained unchanged at 2.81%
- The average contract interest rate for 5/1 ARMs fell to 3.04% from 3.09%