A substantial drop in 30-year fixed mortgage rates for conventional loans fueled an equally noteworthy uptick in mortgage applications as Thanksgiving approached, but flattened out in the week that followed. Interest rates for other loan types remained stable or increased slightly during the same timeframe.
Application volume rose 5.5 percent, on a seasonally adjusted basis, as rates plunged four basis points during the week ending Nov. 23, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.
Industry experts attributed the notable fluctuation in mortgage rates to recent market volatility.
“After several weeks of market volatility, 30-year fixed mortgage rates decreased four basis points to 5.12 percent last week,” MBA Chief Economist Mike Fratantoni said in a press release. “Homebuyers responded, with purchase applications 1.7 percent higher than a year ago, and after adjusting for the Thanksgiving holiday, they increased almost 9 percent from the previous week. The rise in purchase activity was led by conventional purchase applications, which surged almost 12 percent, while government purchases were essentially unchanged over the week. This also pushed the average loan size for purchase applications higher, which likely meant there were fewer first-time homebuyers in the market last week.”
The Market Composite Index, which measures mortgage loan application volume, showed a 29 percent increase from the previous week on an unadjusted basis. The Refinance Index increased 1 percent from the week prior and the seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index decreased 28 percent compared with the previous week and was 2 percent higher than the same week one year ago.
“Refinance activity increased slightly overall, driven by conventional refinances, while government refinances decreased, as both FHA and VA applications dropped over the past week,” Fratantoni said.
On average, 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) saw contract interest rates decrease to 5.12 percent from 5.16 percent, with points decreasing to 0.46 from 0.48 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective also rate decreased from the previous week’s levels.
Freddie Mac’s Primary Mortgage Market Survey showed a flattening of rates among all mortgage types it holds in the week following Thanksgiving.
“Mortgage rates stabilized the last couple of months, as interest rate sensitive sectors such as new auto and home sales have clearly softened the outlook for the economy,” Freddie Mac Chief Economist Sam Khater said in a release. “Homebuyers pounced on the stability in rates as purchase mortgage applications increased, which indicates that despite higher mortgage rates this year there are buyers on the fence waiting for the right time to buy.”
The Freddie Mac report showed that the average 30-year fixed-rate on mortgages it holds remained at 4.81 percent from the week ending Nov. 22 to the week ending Nov. 29. That level represents a significant increase from 3.9 percent rate at the same point a year earlier.
Jumbo loans (those with balances exceeding $453,100) with 30-year fixed rates, MBA’s survey showed no change in the 4.88 percent average contract interest rate from the previous week. Points increased for such loans to 0.31 from 0.29 (including the origination fee) for 80 percent LTV loans and the effective rate remained steady.
Also remaining stable, according to MBA, was the average contract interest rate for 15-year fixed-rate mortgages at 4.53 percent. Points held stable as well for such loans at 0.51 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from the previous week.
Freddie Mac observed only a slight increase in 15-year fixed mortgage rates in the week extending beyond Thanksgiving – to 4.25 percent from 4.24 percent.
MBA reported a three-basis point increase in the average contract interest rate for 30-year fixed-rate mortgages backed by the Federal Housing Administration (FHA) to 5.11 percent from 5.08 percent, with points remaining unchanged at 0.63 (including the origination fee) for 80 percent LTV loans. The effective rate increased as well.
The average contract interest rate for 5/1 ARMs increased as well – rising to 4.29 percent from 4.24 percent – with points decreasing to 0.42 from 0.51 (including the origination fee) for 80 percent LTV loans. The effective rate increased from the week before.