Refi’s activity reaches its highest level in two years
Refinancing applications rose as mortgage rates fell last week, but purchase loan activity posted only a small gain, according to data released Wednesday by the Association of Mortgage Bankers (MBA).
The MBA survey – which covers 75% of all residential mortgage applications in the US – found that the seasonally adjusted refinancing index rose 16% in the week ending August 2 compared to the previous week. Looking at the number of applications in the same week a year ago, the index rose by 59%.
Meanwhile, the seasonally adjusted purchasing index rose 1% from a week earlier but was 11% lower than the same week a year ago. As a result, the MBA’s overall enrollment index rose 6.9% week over week and 10.6% year over year.
“Mortgage rates fell across the board last week and mortgage applications reached their highest level since January of this year,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
Kan said the lower rates were the result of “softening communications from the Federal Reserve and a weak jobs report, adding to growing concerns about an economy slowing faster than expected.”
HousingWire‘s Mortgage Interest Center showed the average 30-year conforming loan rate was 6.77% on Wednesday, up 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 research found that the average contract rate for 30-year conforming loans (balances of $766,550 or less) fell to 6.55% in the week ended August 2, down 27 basis points from the week before. The average rate for jumbo loans (balances above $766,550) fell 30 basis points to 6.77%.
“As a result of lower interest rates, refinancing applications for all loan types increased, especially VA loans, and were nearly 60% higher than this time last year and at a two-year high,” Kan said.
“Despite the downward movement in interest rates, purchasing activity saw only small gains, with an increase in conventional purchase requests offset by a decrease in government purchase requests,” Kan added. “Inventory for sale is beginning to gradually increase in some parts of the country, and homebuyers may be holding off on entering the market given the prospect of lower rates.”
The spike in refinancing applications brought the refi share of all applications to 41.2%, up from 38.2% the week before. The U.S. Department of Veterans Affairs (VA) loans amounted to 14.3% of the total, Federal Housing Administration (FHA) loans were 13.4%, and US Department of Agriculture (USDA) loans were 0.4%.
The share of the mortgage interest deduction (ARM) in activity increased to 6.3% of total applications.
