The Market Composite Index, a measure of mortgage loan application volume, increased 49.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index increased 119% compared with the previous week. The Refinance Index increased 66% from the previous week to the highest level since July 2013. The seasonally adjusted Purchase Index increased 24%from one week earlier to the highest level since September 2013. The unadjusted Purchase Index increased 83% compared with the previous week and was 2% higher than the same week one year ago.
“The U.S. economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates,” said Mike Fratantoni, MBA’s Chief Economist.
Mortgage rates reached their lowest level since May of 2013, and refinance application volume soared, more than doubling on an unadjusted basis, and up 66% after adjusting for the fact that the previous week included the New Year’s holiday, according to MBA. Conventional refinance volume increased to a greater extent than government refinance volume. Applications for larger refinance loans increased more than four times compared to the previous week.
The average conventional refinance application increased to $298,700 from $233,500 the prior week. Although there was a somewhat smaller increase for government refinance volume, VA refinance applications increased by 50%. VA loans tend to be larger than FHA and USDA loans, and hence are more responsive to a given rate change, Fratantoni said.
“In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA’s announcement of a decrease in their mortgage insurance premiums," MBA stated. "Purchase application volume increased by almost 24%, with stronger growth for conventional applications than for government loans."
Purchase application volume was at its highest level since September 2013, increased on a year over year basis in the aggregate, and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year. FHA purchase application volume was up by 17% for the week on a seasonally adjusted basis.
The refinance share of mortgage activity increased to 71% of total applications from 65% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9% of total applications.
The FHA share of total applications decreased to 7.5% this week from 9.3% last week. The VA share of total applications decreased to 9.7% this week from 10.7% last week. The USDA share of total applications decreased to 0.8% from 0.9% last week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89%, the lowest level since May 2013, from 4.01%, with points decreasing to 0.23 from 0.28 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
Mortgage applications increased 49.1% from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Jan. 9, 2015.