After enjoying a steady uptrend in mortgage applications the previous month, mortgage bankers saw application volumes decline four weeks in a row in April, per data provided in the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey.
The month declines came after an 18.6 percent spike in application volume to close out March – a month in which the industry saw a net growth of 7 percent in application volume. MBA’s Market Composite Index for the week ending April 5 indicated a 5.6 percent drop in application volume on a seasonally adjusted basis, followed by drops of 3.5 percent, 7.3 percent and 4.3 percent in subsequent weeks.
MBA Association Vice President of Economic and Industry Forecasting Joel Kan said certain reductions in average contract interest rates, particularly in 30-year fixed-rate loans, may have been driven by market concerns outside the U.S.
“Mortgage rates were lower last week – with the 30-year fixed-rate declining to 4.42 percent – as concerns over global growth, particularly in Germany, outweighed more positive domestic news on first quarter GDP growth and business investment,” Kan said in a press release.
There were dips in average contract interest rates for 30-year fixed-rate mortgages with conforming loan balances of all types covered by the report, the greatest of which affected FHA loans, which decreased to 4.39 percent from 4.49 percent. Conventional and jumbo 30-year fixed-rate loans each saw drops of four basis points.
Meanwhile, 15-year fixed-rate mortgages also saw average contract interest rates decline – to 3.81 percent from 3.87 percent.
The total share of FHA loans decreased to 9.5 percent from 9.9 percent the week prior and the VA share dropped to 10.9 percent from 11.3 percent during the same timeframe.
The report also indicated that the Refinance Index fell 5 percent from the previous week, the seasonally adjusted Purchase Index dropped 4 percent and that although the unadjusted Purchase Index decreased 3 percent from the previous week, it was 1 percent higher than the same week one year before.
The refinance share of mortgage activity also decreased – to 38.8 percent of total applications from 39.4 percent the previous week.
“Applications to refinance and purchase a home both fell, but purchase activity still remained slightly above year ago levels,” Kan said. “The drop in refinances were driven by fewer FHA and VA loan applications, which typically lag the movement of conventional loans.”
The adjustable-rate mortgage (ARM) share of activity fell to 6.2 percent of total applications, the lowest point since August 2018.
“The ARM share of applications decreased to 6.2 percent, its lowest share since August 2018,” Kan said. “So far in 2019, we continue to see a preference for 7/1 ARMs, which account for around 36 percent of all ARM applications, followed by 10/1 and 5/1 ARMs. This is another indication that the few borrowers who choose to apply for ARM loans are electing to reap the benefit of lower rates, as well as some rate stability.”
MBA recently reported that independent mortgage banks and mortgage subsidiaries saw their lowest average loan profits since the financial crisis in 2018 in the association’s annual Mortgage Bankers Performance Report.