30-Year Mortgage Rate Ticks Down to 3.79 Percent, Mortgage Apps Up 1.3 Percent, MBA Says

Mortgage loan applications were up a bit in the last week of January 2015, as more interest rate declines prodded consumers to refinance their existing mortgages.

The Mortgage Bankers Association said last week that mortgage loan applications were up 1.3 percent with seasonality in the week ended January 30, 2015. This marked the third week-over-week increase in January, after seasonality resulted in a slight downtick the week prior. The Refinance Index was up 3 percent in the said period, as more consumers took advantage of low interest rates; currently, the 30-year fixed-rate mortgage is at the lowest it has been on the MBA’s files in more than one year and a half.

Mortgage Applications

Separately, Capital Economics’ recent data showed that refinance application volume for all of January 2015 was up 54 percent from the tail end of 2014. The firm’s property economist Paul Diggle said that this may be the harbinger of a “refinancing boom” that may last for the entire first half of 2015 and result in refinancing volume rising by about 200 percent. In relation to this, Federal Housing Administration-backed refinances were also up significantly, as a recent change to insurance premium guidelines pushed applications up 76.5 percent from the previous week.

“Conventional refinance volume was up only 0.5 percent for the week while VA (Veterans Affairs) refinance volume was down 24.3 percent,” said MBA vice president of research and economics Lynn Fisher. “FHA purchase applications were also up 12.4 percent over the week prior, despite a decrease in purchase applications in the rest of the market.” The uptick in refinance activity made up for the drop in home purchase applications with seasonality, as that metric saw a 2 percent week-over-week drop to end January.

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The aforementioned statistics are in congruence with the U.S. Federal Reserve’s Senior Loan Officer Opinion Survey, which indicates a slacking in demand for home purchase mortgages across most categories, even with credit standards less stringent than they were in the past. But most mortgage executives and specialists polled late in 2014 by Fannie Mae are expecting that purchase volume will recover going forward, though it might not be an instantaneous recovery for the mortgage purchase space.

In a statement, Fannie Mae Economic and Strategic Research Group director of business strategy Steven Deggendorf talked about how lenders are quite upbeat about the broader mortgage space in the coming months. “Although lenders have become increasingly concerned with weak consumer demand over the last year, they are still optimistic about the mortgage business for the longer term,” he said. “Lenders seem to have adjusted to handling compliance issues and can focus more on their firm’s longer-term strategy and business.”

In other data from the MBA’s report for the week ended January 30, the refinance share of mortgage activity was down slightly from 72 percent to 71 percent, a slight drop that does not take away the fact that refinancing is much brisker to start out 2015 as it was months prior. 30-year fixed mortgage rates, on the other hand, dropped four basis points from 3.83 percent to 3.79 percent, or the lowest average on record since May 2013.