Trade war with China is starting to affect mortgage applications

Applications for refinances wiped out previous week’s gains

Trade war with China is starting to affect mortgage applications

Mortgage applications decreased last week as consumers became increasingly concerned about geopolitics.

The Mortgage Bankers Association’s Weekly Mortgage Applications Survey saw a 3.3% decrease on a seasonally-adjusted basis and 4% unadjusted from the week prior.

"Concerns over European economic growth and ongoing uncertainty about a trade war with China were some of the main factors that kept mortgage rates low last week. said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting.

The seasonally adjusted Purchase Index decreased 1% from one week earlier while unadjusted it was down 3%.

"Purchase applications decreased for the third straight week but remained more than 7% higher than a year ago,” added Kan. “It is possible that the trade dispute is causing potential homeowners to hold off on buying, with the fear that further escalation - or the lack of resolution - may have adverse impacts on the economy and housing market."

There was a larger decline for the Refinance Index and refinance share of mortgage activity decreased to 39.7% of total applications from 40.5% the previous week.

“Even with lower rates on three of the five surveyed loan types, refinance activity fell 6 percent, essentially reversing an 8% increase the week before," said Kan.

The ARM share of activity decreased to 6.6% of total applications. The FHA share of total applications increased to 9.6% from 9.4% the week prior. The VA share of total applications increased to 11.2% from 11.0% the week prior. The USDA share of total applications increased to 0.7% from 0.6% the week prior.

Average rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) remained unchanged from 4.33%, with points decreasing to 0.42 from 0.43 (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 4.18% from 4.24%, with points decreasing to 0.23 from 0.35 (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 4.33% from 4.34%, with points decreasing to 0.43 from 0.47 (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 3.73% from 3.78%, with points remaining unchanged at 0.40 (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 3.74% from 3.57%, with points decreasing to 0.34 from 0.37 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.