MBA: Application Volume Falls As Rates Go Back On The Rise

Following the previous week's whopping 23% increase that was driven by historically low interest rates, applications for refinances fell 7% during the week ending Oct. 24, as rates began to rise again, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey.

Applications for purchases fell 5%, on an adjusted basis, compared to the previous week. Overall, application volume was down 6.6%.

On an unadjusted basis, overall volume decreased 7% compared with the previous week. Applications for purchases decreased 5% and were 15% lower compared to the same week one year ago.

The percentage of purchase applications for Federal Housing Administration (FHA) loans increased from 8.3% to 8.9%; the share of applications for Veterans Affairs loans increased from 9.6% to 10.7%; and the share of applications for U.S. Department of Agriculture loans increased from 0.8% to 0.9%.

Despite these increases, the volume of purchase applications for government loans was the lowest since August 2007, due mainly to the fact that many lower-income borrowers have been shut out of the market due to stricter lending standards.

In a release, Mike Fratantoni, chief economist for the MBA, explains that the drop in applications is due mainly to a decline in applications for jumbo loans, as well as refinances for jumbo loans.

‘Borrowers with jumbo loans tend to be most sensitive to changes in rates, and that sensitivity has been clearly apparent in the past few weeks with double- and even triple-digit percentage changes in refinance application volume for jumbo loans,’ says Fratantoni. ‘The average loan size for refinance applications decreased to $263,600 in the most recent week from a survey high of $306,400 the previous week. The decrease was driven by a 41 percent drop in refinance applications for loans greater than $729,000, which had surged almost 130 percent the week before.’

The refinance share of mortgage activity remained unchanged at 65% of total applications.

The average rate for a 30-year fixed-rate mortgage (FRM) with conforming loan balance ($417,000 or less) was 4.13%, up from 4.10% the previous week.

The average rate for a 30-year FRM with jumbo loan balance (greater than $417,000) was 4.13%, up from 4.03% the week prior.

The average rate for a 30-year FRM backed by the FHA was 3.84%, up from 3.81%.

The average rate for a 15-year FRM remained unchanged at 3.28%.

The average rate for a 5/1 adjustable-rate mortgage (ARM) also remained unchanged at 2.94%.

The ARM share of activity decreased to 8.2% of total applications.

All rates are based on closings.


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