How China has helped mortgage applications jump 5%

by Steve Randall09 Aug 2019

Mortgage applications were up in the week ending August 2 as mortgage rates fell.

The Mortgage Bankers Association’s Market Composite Index increased 5.3% week-over-week on a seasonally adjusted basis and 5% on an unadjusted basis.

"The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China. The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks," said Mike Fratantoni, MBA Senior Vice President and Chief Economist.

"The 30-year fixed rate mortgage fell to its lowest level since November 2016, and the drop resulted in an almost 12 percent increase in refinance application volume, bringing the index to a reading over 2,000 - its highest over the same time period. We fully expect that refinance volume will jump even higher this week given the further drop in rates."

Meanwhile, the seasonally adjusted Purchase Index decreased 2% week-over-week as did the unadjusted Purchase Index which was 7% higher than the same week one year ago.

Loan type share of market

The refinance share of mortgage activity increased to 53.9% of total applications from 50.5% the previous week.

The adjustable-rate mortgage (ARM) share of activity remained unchanged at 4.7% of total applications.

Compared with the prior week, the FHA share of total applications decreased to 11.0% from 11.3%; the VA share increased to 12.8% from 12.6%; and the USDA share ns remained unchanged at 0.6%.

Average contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.01% from 4.08%, with points increasing to 0.37 from 0.34 (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 3.96% from 4.04%, with points increasing to 0.26 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 3.86% from 3.94%, with points increasing to 0.38 from 0.29 (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 3.37% from 3.48%, with points increasing to 0.37 from 0.26 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.36% from 3.52%, with points increasing to 0.36 from 0.31 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.


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