There was a new round of interest rate cuts during the week ended February 21, but consumers largely ignored the additional potential for refinancing. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage volume, increased by 1.5 percent from the previous week on an unadjusted basis, but was down 7 percent on an unadjusted basis. The increase in the adjusted index may have, in part, been because of an adjustment to account for the Presidents' Day Holiday which shortened the week.
The refinance share of mortgage activity fell to 60.8 percent of all applications from 63.2 percent the previous week. The Refinance Index dropped 7 percent although it remained 156 percent higher than during the same week in 2019.
Purchase mortgage applications did increase. The seasonally adjusted Purchase Index rose by 6 percent from one week earlier although the unadjusted Purchase Index dipped 1 percent compared with the previous week and was 10 percent higher than during the comparable period a year ago.
Refi Index vs 30yr Fixed
Purchase Index vs 30yr Fixed
"Last week appears to have been the calm before the storm. Weaker readings on economic growth caused a slight drop in mortgage rates, bringing them back to their level two weeks ago, but applications overall moved 1.5 percent higher," said Mike Fratantoni, MBA's Senior Vice President and Chief Economist. "Refinance applications for conventional loans dropped a bit, but FHA refinances increased more than 22 percent. Purchase volume remained strong, supported both by low rates and the increased pace of construction over the past few months. With housing supply at low levels, new inventory is a positive development for prospective homebuyers."
Added Fratantoni, "As fears regarding the coronavirus have increased, Treasury yields have dropped to record lows this week amid the ensuing financial market volatility. Next week's results will show the impact this drop in Treasuries had on mortgage activity."
The FHA share of total applications increased to 10.5 percent from 9.5 percent the previous week and the VA share fell to 11.8 percent from 12.1 percent. USDA loans accounted for 0.5 percent of the total, up from 0.4 percent the week prior.
Average mortgage rates declined during the week for all products tracked by MBA. Effective rates also moved lower.
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with origination balances at or below the conforming limit of $510,400 decreased to 3.73 percent from 3.77 percent and points decreased to 0.27 from 0.28. Rates for the jumbo version of the 30-year FRM, loans with balances exceeding the conforming limit, decreased to 3.72 percent from 3.79 percent, with points increasing to 0.23 from 0.19.
The average contract interest rate for 30-year FRM backed by the FHA averaged 3.84 percent with .26 point. The prior week the rate was 3.86 percent with 0.24 point.
Fifteen-year FRM had an average rate of 3.18 percent, down from 3.22 percent a week earlier. Points declined to 0.23 from 0.26.
The average contract interest rate for 5/1 adjustable rate mortgages (ARMs) dipped to 3.21 percent from 3.23 percent, with points increasing to 0.28 from 0.21. ARMs had a 5.3 percent share of the weeks activity compared to 5.4 percent during the week ended February 14.
MBA's Weekly Mortgage Applications Survey been conducted since 1990 and covers over 75 percent of all U.S. retail residential applications Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rate information is based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.