Mortgage volumes break 6-week slide with refi rally

Mortgage application volume, particularly for refinances, rose for the first time in over a month amid a volatile rate environment, according to the Mortgage Bankers Association.

The MBA’s Market Composite Index climbed a seasonally adjusted 3.8% over the week ending Sept. 16, breaking a six-week streak of declines. The Index, a measure of weekly loan volume based on surveys of association members, included a Labor Day adjustment and was down 64% from the same time last year. 

“The weekly gain in applications, despite higher rates, underscores the overall volatility right now as well as Labor Day-adjusted results the prior week,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting, in a press release.

Mortgage rates last week soared to 6.25%, their highest level since October 2008, according to the MBA. The rates moved amid inflation concerns and ahead of the Federal Reserve’s September meeting and anticipated interest rate hike. 

The Refinance Index shot up 10% over the past week and captured a greater 32.5% share of total applications compared to 30.2% the week prior. The seasonally adjusted Purchase Index also ticked up 1%. Still, the Refinance Index remains 83% below its level a year ago, while the Purchase Index is down 29% in the past 12 months, for the second week in a row. 

The refi rally pushed the Government Index up 3.2% in the past week, although slight gains in total share of activity by government-sponsored loan programs have already been negated. Federal Housing Administration-backed applications accounted for 13.3% of activity compared to 13.4% in the seven days prior. Department of Veterans Affairs loans fell to 10.9% from 11.3% week over week, and U.S. Department of Agriculture applications made up 0.6% of activity, down from 0.7% previously. 

The slight increase in conventional loan share pulled the average purchase-loan size to $413,200, a 2% rise from the prior week’s average of $405K. The mean refinance loan sat at $267,200, a 2.9% fall from the prior week’s $275,200 average, at the same time as an 11.6% jump in the Government Refi Index. The overall average loan size remained flat, rising $100 to $365,800 last week. 

Borrower demand for adjustable-rate mortgages (ARMs) remained at 9.1% week-over-week, after rising from 8.5% two weeks earlier. 

The average contract interest rate for 30-year fixed rate mortgages, with conforming loan balances of $647,200 or less, climbed to 6.25% last week from 6.01% the week prior, while points increased from 0.46 to 0.39 for 80% loan-to-value ratio loans. 

Lenders in recent weeks began to buy Fannie Mae and Freddie Mac-eligible loans up to $715K, the conforming loan limit for next year set by a federally-mandated formula. Those companies will have to retain the mortgages on their balance sheets until the new year. Home prices meanwhile may be plateauing. 

The mean interest rate for 30-year fixed-rate jumbo loan mortgages greater than $647,200 leapt to 5.79% compared to 5.56% the week prior, with points jumping to 0.46 from 0.39 for LTV loans.

Over the same period, the average contract interest rate for 30-year fixed rate FHA loans moved to 5.85% last week from the previous week’s 5.71%, with points for LTV loans inching up to 1.15 from 1.12. 

The average contract fixed rate for 15-year mortgages rose to 5.4% from 5.3%, as points hopped to 1.06 from 0.89 for LTV loans. 

ARMs saw their average contract interest rate jump to 5.14% from 4.83% the week prior, as points shot up to 0.99 from 0.52 for LTV loans.