After increasing for three consecutive weeks, mortgage application volume fell 8.4% during the week ended March 13, as rates increased and the wider economic impact of the coronavirus began to take hold.
Applications for refinances decreased 10%, compared with the previous week, while applications for purchases decreased 1%, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
On an unadjusted basis, total volume fell 8% compared with the previous week. Applications for purchases were flat on an unadjusted basis but were up 11% compared with the same week one year earlier.
Although applications for refinances dropped, they were nonetheless 402% higher compared with a year earlier.
The average rate for 30-year fixed-rate mortgage, based on closings, was 3.74%, up from 3.47%.
“The ongoing situation around the coronavirus led to further stress in the financial markets late last week, with unprecedented volatility and widening spreads,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “This drove mortgage rates back up to their highest levels since mid-February and led to a 10 percent decrease in refinance applications.
“However, refinance activity remains very high,” Kan says. “Excluding the spike two weeks ago, the index remained at its highest level since October 2012, and refinancing accounted for almost 75 percent of all applications.
Kan adds that “the Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing.”
“Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy,” he says.
While the full impact of the coronavirus on the housing market is currently hard to predict, it is expected that home sales will decrease substantially, if not simply for the reason that most schools are closed and families and individuals are being asked to voluntarily self-quarantine.
For the week ended March 13, the refinance share of mortgage activity decreased to 74.5% percent of total applications, down from 76.5% the previous week.
The adjustable-rate mortgage (ARM) share of activity increased to 6.4% of total applications.