Mortgage Applications Still on Downward Trend Despite Low Interest Rates

This week’s latest data from the Mortgage Bankers Association shows that mortgage applications were down once again for the week ended February 20,2015, even as mortgage interest rates remain close to their historically low and 20-month low levels.

The MBA’s new report includes an adjustment for President’s Day, and in there, the Market Composite Index (combined purchase and refinance applications) decreased 3.5 percent with seasonality figured in. Without seasonal adjustment, the Market Composite Index took a rather sizeable hit, dropping 12 percent from the previous week. The seasonally adjusted Purchase Index was up 5 percent week-over-week, but went down 2 percent from the past week without seasonality. The Refinance Index, on the other hand, lost 8 percent from the week before.

Mortgage Applications

The refinance share of mortgage applications took another significant loss, after hitting 71 percent just a few weeks ago. From 66 percent the week prior, refinances took up only 62 percent for the week ended February 20. The adjustable-rate mortgage share of applications was also down, slipping to 5.2 percent. Federal Housing Administration-backed mortgages took up a 15.3 percent share of applications, up slightly from the previous week’s 15.2 percent. Department of Veteran’s Affairs applications jumped up from 8 percent to 9.6 percent, and lastly, United States Department of Agriculture applications took up an 0.9 percent share, remaining stationary from the prior week.

Mortgage activity had generally trended downward in 2014 due to the combination of higher-than-early-2013 level mortgage rates and rapidly rising prices. But with home price increases having moderated and interest rates gone back down to their lowest levels since May 2013, that stimulated the mortgage market this year, as the market got off to a rather fast start. Prior to the reports of the past two weeks, mortgage applications had been rising notably on the MBA’s weekly report, with mortgage rates largely on a downward trajectory. However, this changed in February, as positive economic news has driven rates up on the MBA’s report, as well as on many other mortgage rate surveys and tickers.

Interest rates for 30-year fixed mortgages with conforming loan balances of $417,000 or less teetered closer to the 4 percent threshold, ticking up from 3.93 percent to 3.99 percent, with points down from 0.35 to 0.33. 30-year jumbo FRMs, or fixed-rate mortgages with balances greater than $417,000, made a significant leap, moving up 17 basis points from 3.92 percent to 4.09 percent, with points down from 0.28 to 0.21. 30-year FHA-backed mortgages also moved up rather quickly this past week, adding nine basis points from 3.73 percent to 3.82 percent, with points up from 0.12 to 0.15.

15-year fixed mortgage rates, which were at 3.24 percent last week, added four basis points to end the most recent week at 3.28 percent. Points were down from 0.35 to 0.30. Lastly, the average interest rate for 5/1 ARMs was up by 19 basis points, as rates skyrocketed from 3.09 percent to 3.28 percent and points took a dive from 0.47 to 0.31. All rates above are for loans with an 80 percent loan to value ratio, and all points include the origination fee.