Mortgage Applications Volume Plummets 13.2 Percent This Week, MBA Survey Says

Mortgage ApplicationsDue to the recent increase in mortgage interest rates, loan applications took a generous 13.2 percent hit from the previous week, according to the Mortgage Bankers Association’s most recent Weekly Mortgage Application Survey, which covers the week ended February 13, 2015.

Love was not in the air, to put it informally, for the mortgage space in the week that ended a day before Valentine’s Day. With mortgage rates ticking up amid positive U.S. economic news, the Market Composite Index lost 13.2 percent with seasonality, as compared to the prior week. Without seasonal adjustment, the Market Composite Index, which covers combined purchase and refinance applications, was down 12 percent week-over-week.

The Refinance Index was also down by double digits, slipping 16 percent from the previous week. With seasonal adjustment, the Purchase Index dropped 7 percent, while the unadjusted Purchase Index lost 2 percent but remained 1 percent higher on a year-over-year basis.

The refinance share of total mortgage activity, which had recently broken the 70 percent mark for the first time in months, tumbled significantly in the week ended February 13. From the previous week’s level of 69 percent, refinances took up only 66 percent of all mortgage applications. This figure, however, is much healthier than it was in most MBA mortgage application reports from the second half of 2014. The share of adjustable-rate mortgages slipped as well, dipping to 5.3 percent of all mortgage applications.

The share of Federal Housing Administration-backed mortgages moved up to 15.2 percent from 14.1 percent, while the share of Department of Veteran’s Affairs applications was down from 8.3 percent to 8 percent. Lastly, the share of United States Department of Agriculture mortgages moved up slightly from 0.7 percent to 0.9 percent.

“Mortgage rates increased to their highest level since the beginning of the year last week, and application volume dropped sharply as a result, particularly for refinances,” explained MBA chief economist Michael Fratantoni in a statement. “The market index declined to its lowest level since the week ending January 2nd as purchase application activity decreased 7 percent and refinance applications decreased 16 percent Refinance volume fell particularly for larger loans, as evidenced by the decline of almost $25,000 in the average loan size for a refinance loan.” Despite recent rate hikes, mortgage interest rates are still at their lowest ranges in more than a year and a half.

Interest rates on 30-year fixed-rate mortgages with conforming loan balances ($417,000 and below) advanced by close to double digits, adding nine basis points from 3.84 percent to 3.93 percent. 30-year jumbo FRMs ($417,001 and up) ticked up by a more muted two basis points, moving from 3.90 percent to 3.92 percent. Interest rates on 30-year FHA-backed fixed mortgages edged up one basis point from 3.72 percent to 3.73 percent. As far as 15-year fixed-rate mortgages are concerened, the interest rate on this type of loans rose by nine hundredths of a percentage point from 3.15 percent to 3.24 percent,. Lastly, the mortgage rate on 5/1 ARMs climbed two basis points from 3.07 percent to 3.09 percent. All of the above figures pertain to loans with an 80 percent loan-to-value ratio.