The real estate market arguably is one of the most susceptible to the effects, variations and pull of economic interactions. With a rise in national economic fortune comes an almost directly proportional increase in real estate transactions from mortgage to listings etc. Thus when it has to do with mortgages, the story is almost a reflection of the national economic story or not? While the economy is taking the highway up, Mortgage applications are nevertheless facing the opposite direction as the data from the Mortgage Bankers Association (MBA) Weekly Application survey for the week ending June 14, 2019 shows applications dropping by 3.4 percent from the previous week.
And the survey of the mortgage market is telling is consistent either way you look at it, both from the adjusted and unadjusted basis. The Market Composite Index which measures the quantum of mortgage loan applications showed a decrease of 3.4 percent on a seasonally adjusted basis from what it was the previous week. Without adjustments, the index showed a decrease of 4 percent compared to the previous week. The Refinance Index dropped by 4 percent from what it was a week earlier. By the seasonal adjustments the Purchase Index rallied at a point short by 4 percent from one week earlier while its unadjusted reading showed a decrease of 5 percent from what it was the week before even though 4 percent higher than what it read at this same week a year ago.
Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting sought to put the drop in refinancing activity in perspective. According to him, the pullback in overall refinance activity is the outcome of a six-week consistent increase, even if slightly, of mortgage rates for 30-year loans. Kan further posits that; “Borrowers were sensitive to rising rates, but the refinance share of applications was still at its highest level since January 2018, and refinance activity was at its second highest level this year. Government refinances actually increased last week, led by a 17 percent jump in VA refinance applications, while conventional refinance applications decreased 7 percent.
However, and as expected, the positive economic story in the country was able to sustain a decent figure in the purchase applications section as it remained 4 percent higher than what obtained at this time last year. This is despite dropping more than 3 percent last week. Kan notes that strong demand from first-time buyers and low unemployment is the reason for this edge over last year’s results.
Compared to last week’s 49.8 percent, the refinance share of mortgage activity increased to 50.2 percent of total applications. The adjustable-rate mortgage (ARM) share rallied around 6.1 percent of total applications, representing a decrease. The FHA share of total applications showed a slight increase to 9.4 percent up from the previous weeks 8.9 percent. But it wasn’t just the FHA as VA share of total applications also crawled from 11.0 percent to 11.9 percent representing an increase of 0.9 percent from the previous week.
For average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less), an increase of 0.02 percent ensured that the rally went upwards to 4.14 percent from 4.12 percent. 80 percent loan-to-value ratio (LTV) loans was also pointing upwards from what obtained last week as points increased to 0.38 from 0.33 (including the origination fee).
But the needle wasn’t all pointing upwards as some indices refused to budge. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) was one of these, staying put at 4.04 percent. Points on same however increased to 0.24 from 0.17 (including the origination fee) and the effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA did not stay put as it increased to 4.12 percent from 4.09 percent. For 80 percent LTV loans, the points inched upwards to 0.44 from 0.26 (including the origination fee). The effective rate departed for a higher point from where it was berthed last week.
The needle also pointed downwards in some cases, after all you cannot win all. In the spirit of win some, lose some, the average contract interest rate for 15-year fixed-rate mortgages decreased to 3.50 percent from where it was at 3.53 percent. Points increased to 0.33 from 0.32 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
Finally, the average contract interest rate for 5/1 ARMs increased to 3.45 percent from 3.43 percent. 80 percent LTV loans shed points to settle at 0.23 from 0.32 (including the origination fee). The effective rate dropped from the previous week.
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