Falling Interest Rates Spur Mortgage Application Rebound
Jan 9th, 2019 @ 1:48 PM by Amber Nelson
The number of U.S. mortgage applications soared in the latest week, according to the Mortgage Bankers Association, a result of a sharp drop in long-term interest rates.
The MBA’s Market Composite Index – a measure of mortgage application volume – rose 23.5% on an unadjusted basis during the week ended Jan. 4, 2019.
“Mortgage rates fell across the board last week and applications rebounded sharply, after what was a slower than usual holiday period,” said MBA Associate Vice President of Economic and Industry Forecasting Joel Kan. “The 30-year fixed-rate mortgage declined 10 basis points to 4.74%, the lowest since April 2018, and other loan types saw rate decreases of between 9 and 20 basis points.”
Requests for home purchase loans jumped 17% from the week before, as lower rates made high mortgage price tags just a little lower. That was the strongest showing for purchase applications in over a month.
The largest gain though was in refinance applications. The MBA Refinance Index grew 35% over the previous week, refinance requests making up 45.8% of all applications, an increase from 42.7% a week earlier, the biggest share in 11 months.
“This drop in rates spurred a flurry of refinance activity – particularly for borrowers with larger loans – and pushed the average loan size on refinance applications to the highest in the survey,” Kan added. “The surge in refinance activity also brought the refinance index to its highest level since last July.”
Adjustable rate mortgages also surged in popularity, making up 8.4% of all applications. Government loans also fared better, with Federal Housing Administration (FHA) loans gaining 10.3% of the mortgage requests, up from 10.3% and Veteran Affairs’ (VA) loan representing 11.6% of applications, up from 11%. Department of Agriculture loans requests were unchanged at 0.6% from the week before.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.