Refinance applications picked up as mortgage rates fell last week, but purchase loan activity had only a small gain, according to data released Wednesday by the Mortgage Bankers Association (MBA).
The MBA’s survey — which covers 75% of all retail residential mortgage applications in the U.S. — found that the seasonally adjusted refinance index increased 16% for the week ending Aug. 2 compared to the previous week. When considering the volume of applications in the same week one year ago, the index rose 59%.
Meanwhile, the seasonally adjusted purchase index rose 1% from one week earlier but was 11% lower from the same week a year ago. As a result, the MBA’s overall application index climbed 6.9% week over week and 10.6% year over year.
“Mortgage rates decreased across the board last week and mortgage application volume reached its highest level since January of this year,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
Kan said that the lower rates resulted from “dovish communication from the Federal Reserve and a weak jobs report, which added to increased concerns of an economy slowing more rapidly than expected.”
HousingWire’s Mortgage Rates Center showed that the average 30-year conforming loan rate was 6.77% on Wednesday, down from 7.01% a week earlier. The recently volatile 15-year conforming rate averaged 6.38% on Wednesday, down 49 basis points (bps) from a week ago.
The MBA’s survey showed the average contract interest rate for 30-year fixed-rate conforming loans (balances of $766,550 or less) decreased to 6.55% during the week ending Aug. 2, down 27 bps from the the previous week. The average rate for jumbo loans (balances above $766,550) fell 30 bps to 6.77%.
“As a result of lower rates, refinance applications increased across all loan types, particularly for VA loans, and were almost 60% higher than it was at this time last year and at its highest level in two years,” Kan said.
“Despite the downward movement in rates, purchase activity only saw small gains, with an increase in conventional purchase applications offset by decreases in government purchase applications,” Kan added. “For-sale inventory is beginning to increase gradually in some parts of the country, and home buyers might be biding their time to enter the market given the prospect of lower rates.”
The spike in refinance applications took the refi share of all applications to 41.2%, up from 38.2% the previous week. U.S. Department of Veterans Affairs (VA) loans were 14.3% of the total, Federal Housing Administration (FHA) loans were 13.4%, and U.S. Department of Agriculture (USDA) loans were 0.4%.
The adjustable-rate mortgage (ARM) share of activity increased to 6.3% of total applications.
