Low rates mean 'new year, new mortgage' as applications rise

by Steve Randall16 Jan 2020

The continued low mortgage rates are proving a winner for American homeowners and buyers with mortgage applications starting 2020 well.

The Mortgage Bankers Association’s weekly survey shows that both refinance and purchase applications were up compared to the week before (which included an adjustment for the New Year’s Day holiday).

MBA’s Market Composite Index was up 30.2% (seasonally adjusted) week-over-week with the unadjusted index up 67%.

The Refinance Index increased 43% week-over-week and was up 109% year-over-year.

The seasonally adjusted Purchase Index increased 16% week-over-week while the unadjusted Purchase Index increased 51% week-over-week and 8% year-over-year.

"The mortgage market saw a strong start to 2020. Applications increased across the board, and the 30-year fixed mortgage rate hit its lowest level since September 2019," said Joel Kan, Associate Vice President of Economic and Industry Forecasting. "Refinances increased for both conventional and government loans, as lower rates provided a larger incentive for borrowers to act. It remains to be seen if this strong refinancing pace is sustainable, but even with the robust activity the last two weeks, the level is still below what occurred last fall."

For homebuyers, the start of 2020 was a busy time as several positive factors converged.

"Homebuyers were active the first week of the year. Purchase activity was 8% higher than a year ago and the purchase index increased to its highest level since October 2009,” added Kan. “Low rates and the solid job market continue to encourage prospective buyers to enter the market."

The stats

  • The refinance share of mortgage activity increased to 62.9% of total applications from 58.9% the previous week.
  • The adjustable-rate mortgage (ARM) share of activity increased to 4.5% of total applications.
  • The FHA share of total applications increased to 12.7% from 12.2% the week prior.
  • The VA share of total applications decreased to 12.1% from 14.1% the week prior.
  • The USDA share of total applications remained unchanged at 0.5% from the week prior.

Mortgage rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to the lowest level since September 2019, 3.87%, from 3.91%, with points decreasing to 0.32 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 $510,400) decreased to the lowest level since November 2016, 3.83%, from 3.88%, with points increasing to 0.24 from 0.17 (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 the lowest level since October 2019, 3.78%, from 3.85%, with points increasing to 0.30 from 0.23 (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 the lowest level since September 2019, 3.30%, from 3.35%, with points decreasing to 0.27 from 0.29 (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 3.35% from 3.19%, with points decreasing to 0.11 from 0.18 (including the origination fee) for 80% LTV loans. The effective rate increased from last week. 


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