Are we reaching the end of the refinancing boom?

by Steve Randall21 Nov 2019

There were fewer mortgage applications for refinancing last week while the share of purchase applications increased.

The Mortgage Bankers Association says that its Market Composite Index fell 2.2% week-over-week (seasonally adjusted) including adjustment for the Veterans Day holiday.

On an unadjusted basis, the index fell 14%. The Refinance Index was down 8% but was 152% higher than a year ago. The Purchase Index gained 7% week-over-week (seasonally adjusted), 8% (unadjusted), and was 7% higher than a year earlier (unadjusted).

"US and China trade anxieties and protests in Hong Kong pulled U.S. Treasuries lower last week, and the 30-year fixed mortgage rate followed the same path, dipping below 4%," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

With the refinance share of mortgage activity decreasing to 59.5% of total applications from 61.9% the previous week, Kan questions whether the slowdown in refinancing activity may be due to the supply of those customers.

"Rates have stayed in the same narrow range of around 4% since July, so we may be starting to see the expected slowdown in refinancing as the pool of eligible homeowners shrinks."

The adjustable-rate mortgage (ARM) share of activity decreased to 4.6 percent of total applications; the FHA share decreased to 13.0% from 13.1%; the VA share increased to 12.9% from 12.7; and the USDA share remained unchanged from 0.5% the week prior.

Average rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 3.99% from 4.03%, with points increasing to 0.33 from 0.31 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater
than $484,350) decreased to 3.93% from 3.98%, with points increasing to 0.28 from 0.22 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.80% from 3.85%, with points increasing to 0.32 from 0.28 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.40% from 3.43%, with points increasing to 0.31 from 0.28 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs increased to 3.51% from 3.40%, with points increasing to 0.23 from 0.17 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 


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