Mortgage volume picks up after two weeks of lows, led by refinances

After declining for two consecutive weeks to levels not seen in over a year, mortgage activity reversed course, due, in part, to lower interest rates, according to the Mortgage Bankers Association.

The market composite index, which tracks mortgage application activity through a survey of MBA members, jumped a seasonally adjusted 16% week-over-week for the period ending July 9. The week’s numbers included an adjustment for the July 4th holiday. The unadjusted index, however, came in 7% lower. Compared to the same week one year ago, seasonally adjusted volume showed a decrease of 10.8%.

Both refinances and purchases contributed to the weekly upswing. The refinance index climbed 20% over the prior week and was 29% lower than the same week in 2020. The Purchase Index posted a seasonally adjusted 8% increase from one week earlier, while on an unadjusted basis, the index registered a 13% decline in volume. The unadjusted Purchase Index was 29% lower from its level suring the same week last year.

Refinancing activity spiked thanks to falling interest rates, with conventional refinances registering a 23% weekly increase, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.

“Treasury yields have trended lower over the past month as investors remained concerned about the COVID-19 variant and slowing economic growth,” Kan said in a press statement. Mortgage rates correspond with Treasury yields, which have moved little in the late spring and summer.

The rise in refinances was reflected in their total share of mortgage activity. Refinancing loans accounted for 64.1% of volume, up from 61.6% a week earlier.

Adjustable-rate mortgage applications also took a slightly larger share, accounting for 3.5% of overall volume, compared with 3.3% the previous week.

Mortgage volume picks up after two weeks of lows, led by refinances

Average size of refinances increases; purchases shrink
The uptick in refinance activity was accompanied with a noticeable rise in refinance size. The average price of a refinance application climbed above $300,000 for the first time in three weeks to $316,300, up 8.6% from $291,200 one week earlier. But average purchase sizes fell, even as applications picked up. The average purchase-application size decreased to its lowest level since January, falling to $398,600 from the previous week’s $405,300, a 1.7% drop. It was only the second time since mid-April that the weekly average purchase size had fallen below $400,000.

“We continue to see ebbs and flows as housing demand remains strong, but for-sale inventory remains low. However, lower rates may be helping some home buyers close on their purchases, especially first-time home buyers,” Kan said.

Despite the decline in purchase size, the average size of mortgage loans overall for the week climbed to $345,900 from $335,400, up 3.1%.

The share of applications coming through government programs accounted for a smaller share of overall volume week-over-week. Federal Housing Authority-sponsored loans equaled 9.5% of all applications, down from 9.8% the prior week. Veterans Administration-backed applications decreased to 10.3% of total volume, down from a 10.8% share a week earlier, while the percentage of U.S. Department of Agriculture loans remained the same at 0.5% of total applications.

Interest rates fall further, with 30-year rate at its lowest in months
The rise in mortgage activity corresponded with a decline in most major interest-rate types for the week.

  • The average contract interest rate of 30-year fixed-rate mortgages with conforming loan balances of $548,250 or less fell six basis points to 3.09%, the lowest it’s been since mid February. A week ago, the rate came in at 3.15%.
  • The average contract interest rate of 30-year fixed-rate jumbo loans (with balances greater than $548,250) dropped to 3.16%, compared to 3.2% the prior week.
  • The average contract interest rate of 30-year fixed-rate mortgages backed by the Federal Housing Authority decreased to 3.15%, a two-basis-point decrease from 3.17% the previous week.
  • The average contract interest rate of 15-year fixed-rate mortgages dipped to 2.48%, compared to 2.52% the previous week.
  • The interest rate for 5/1 adjustable-rate mortgages showed the only weekly increase, climbing to 3.02% from 2.94%.

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