The economic impact of coronavirus resulted in mortgage application volume plummeting 29.4% on an adjusted basis during the week ended March 20, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey.
Applications for refinances fell 34% while applications for purchases decreased 15%.
Applications for purchases decreased 14% on an unadjusted basis and were down 11% compared with the same week one year ago.
Although applications for refinances fell considerably, they were still up 195% compared with a year ago.
It remains unclear how much of an impact the coronavirus pandemic will have on the economy and the housing market, but it is expected that purchase applications will drop significantly.
Preliminary figures from the MBA show that California, New York and Washington saw purchase application volume drop 23%, 35% and 17%, respectively, during the week ended March 20.
“The 30-year fixed mortgage rate reached its highest level since mid-January last week, even as Treasury yields remained at relatively low levels,” says Joel Kan, associate vice president of economic and industry forecasting for the MBA, in a statement. “Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges.
“With these higher rates, refinance activity fell 34 percent, and both the conventional and government indices dropped to their lowest level in a month,” Kan says. “Looking ahead, this week’s additional actions taken by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance.”
Kan adds that purchase applications “were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes.”
“Last week’s purchase index fell 15 percent to its lowest level since August 2019,” he says. “Compared to a year ago, purchase applications were down 11 percent – the first year-over-year decline in over three months. Potential homebuyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook.”
The refinance share of mortgage activity decreased to 69.3% of total applications, down from 74.5% the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 6.1% of total applications.
The average rate for a 30-year fixed-rate mortgage, based on closings, was 3.82%, up nearly nine basis points from 3.74% the previous week.