Lowest rates in almost 3 years prompted refi surge

by Steve Randall15 Aug 2019

Homeowners have been keen to take advantage of lower mortgage rates and refinances surged last week.

The Mortgage Bankers Association’s Market Composite Index of mortgage applications for the week ending Aug. 9, 2019, was up 21.7% compared to a week earlier on a seasonally adjusted basis, and up 20% unadjusted.

The gain was driven by a 37% jump in the Refinance Index week-over-week, to the highest level since July 2016 – it was up 196% year-over-year.

"The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates. Fears of an escalating trade war, combined with economic and geopolitical concerns, once again pulled U.S. Treasury rates lower. The 30-year fixed mortgage rate decreased eight basis points to 3.93 percent - the lowest level since November 2016 - and has now dropped more than 80 basis points this year," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

He added that rates have decreased 15 basis points in just two weeks and the refinance index has increased more than 50% in that time. The government refinance index, driven by a 25% increase in VA refinance applications, is now at its highest level since May 2013.

Meanwhile, the Purchase Index saw a 2% rise on an adjusted basis (1% unadjusted) and was up 12% year-over-year.

Data on the share of mortgage applications reveals that:

  • The refinance share of mortgage activity increased to 61.4% of total applications from 53.9% the previous week;
  • The adjustable-rate mortgage (ARM) share of activity increased to 6.0% of total applications;
  • The FHA share of total applications decreased to 9.5% from 11.0% percent the week prior;
  • The VA share of total applications decreased to 12.2% from 12.8% the week prior;
  • The USDA share of total applications decreased to 0.5% from 0.6% the week prior.

Average contract mortgage rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to its lowest level since November 2016, 3.93%, from 4.01%, with points decreasing to 0.35 from 0.37 (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 its lowest level since November 2016, 3.88%, from 3.96%, with points decreasing to 0.24 from 0.26 (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 its lowest level since November 2016, 3.81%, from 3.86%, with points decreasing to 0.29 from 0.38 (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 its lowest level since November 2016, 3.28%, from 3.37%, with points decreasing to 0.34 from 0.37 (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 3.43% from 3.36%, with points decreasing to 0.35 from 0.36 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.


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