Refinancing Share Tumbles to 7-1/2 Year Low

Mortgage activity increased during the week ended February 3, with applications for both purchase and refinance mortgages pulling in small gains.  The Mortgage Bankers Association's (MBA's) Market Composite Index, a measure of application volume rose 2.3 percent, on a seasonally adjusted basis, compared to the week ended January 27 and was 6.0 percent higher before adjustment.  

The Refinance Index gained 2 percent compared to the previous week and the share of mortgage activity decreased from 49.4 percent a week earlier to 47.9.  It was the smallest share of refinancing since June 2009. 

The seasonally adjusted Purchase Index added 2 percent from week-earlier levels and was up 9 percent unadjusted.  The index was 4 percent higher than during the same week in 2016.  

Refi Index vs 30yr Fixed

Purchase Index vs 30yr Fixed

The FHA share of total applications decreased to 11.9 percent from 12.1 percent the previous week and the VA share rose to 12.7 percent from 12.4 percent.  The USDA share of total applications was unchanged at 0.9 percent.

In most cases interest rates were slightly lower than during the prior week.  The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($424,000 or less) decreased to 4.35 percent from 4.39 percent.  Points were unchanged at .34 and the effective rate was down.  

The contract rate for 30-year FRM with jumbo loan balances (greater than $424,000) decreased to 4.27 percent from 4.32 percent.  Points averaged 0.31, down from 0.34.the previous week and the effective rate dropped as well.

Thirty-year FRM backed by the FHA had an average rate of 4.16 percent with 0.37 point.  The prior week the rate was 4.16 percent with .35 point.  The effective rate was unchanged.

There was a decline of 6 basis points in the contract interest rate of 15-year FRM, to an average rate of 3.55 percent.  Points ticked up to 0.34 from 0.33 but the effective rate was lower than the prior week's average.  

Applications for adjustable-rate mortgage (ARM) increased to their largest share since January 2016, 6.9 percent, from a 6.4 percent share the previous week. The average interest rate for 5/1 ARMs was also up, averaging 3.39 percent compared to 3.33 percent.  Points eased to 0.18 from 0.22 and the effective rate was higher.

MBA's data is derived from its Weekly Mortgage Application Survey which covers over 75 percent of all U.S. retail residential mortgage applications, and has been conducted since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100 and interest rates are based on loans with an 80 percent loan-to-value ratio and points that include the origination fee.