A mixed week for mortgage rates caused a split in application volume between refinances and purchase loans.
Total mortgage application volume rose 1.5% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index, which included the Presidents Day holiday.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.73% from 3.77%, with points decreasing to 0.27 from 0.28 (including the origination fee) for loans with a 20% down payment. Rates did not start to fall sharply, however, until the end of the week, and the first day of the week was the holiday.
Applications to refinance a home loan fell 1% for the week but were still 152% higher than a year ago. Refinance volume is much stronger overall right now, because mortgage rates are about a full percentage point lower than they were a year ago. Refinance volume will likely increase more this week, as rates on Monday fell to the lowest level in eight years.
“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. “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 Treasurys had on mortgage activity.”
Mortgage applications to purchase a home increased 6% for the week and were 10% higher annually. Purchase volume has been less robust recently due to the tight supply of available homes for sale. Single-family housing starts are increasing, especially in the last few months but are still not at even historically average rates.
“Purchase volume remained strong, supported both by low rates and the increased pace of construction over the past few months,” said Fratantoni. “With housing supply at low levels, new inventory is a positive development for prospective homebuyers.”