Mortgage applications decreased 29.4% last week from a week earlier as interest rates rose and the corona virus spread accelerated, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 20.
The Market Composite Index, a measure of mortgage loan application volume, decreased 29.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 29% compared with the previous week.
The Refinance Index decreased 34% from the previous week and was 195% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 15% from one week earlier. The unadjusted Purchase Index decreased 14% compared with the previous week and was 11% lower than the same week one year ago.
“The 30-year fixed mortgage rate reached its highest level since mid-January last week, even as Treasury yields remained at relatively low levels. Several factors pushed rates higher, including increased secondary market volatility, lenders grappling with capacity issues and backlogs in their pipelines, and remote work staffing challenges,” said Joel Kan, MBA’s associate VP of economic and industry forecasting. “With these higher rates, refinance activity fell 34%, and both the conventional and government indices dropped to their lowest level in a month. Looking ahead, this week’s additional actions taken by the Federal Reserve to restore liquidity and stabilize the mortgage-backed securities market could put downward pressure on mortgage rates, allowing more homeowners the opportunity to refinance.”
Added Kan, “Home purchase applications were notably impacted by rising rates and the widespread economic disruption and uncertainty over household employment and incomes. Last week’s purchase index fell 15% to its lowest level since August 2019. Compared to a year ago, purchase applications were down 11% – the first year-over-year decline in over three months. Potential home buyers might continue to hold off on buying until there is a slowdown in the spread of the coronavirus and more clarity on the economic outlook.”
As an early look into the coronavirus-related impact at the state level, below are results showing the not seasonally adjusted, weekly percent change in the number of purchase applications from California, New York, and Washington:
| CA | NY | WA | |
| 3/13/2020 | 3% | -24% | -3% |
| 3/20/2020 | -23% | -35% | -17% |
The refinance share of mortgage activity decreased to 69.3% of total applications from 74.5% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.1% of total applications.
The FHA share of total applications increased to 8.4% from 7.3% the week prior. The VA share of total applications decreased to 12.5% from 14.5% the week prior. The USDA share of total applications remained unchanged from 0.4% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.82% from 3.74%, with points decreasing to 0.35 from 0.37 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) increased to 3.84% from 3.77%, with points increasing to 0.35 from 0.32 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.69% from 3.71%, with points increasing to 0.43 from 0.28 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 3.28% from 3.10%, with points increasing to 0.38 from 0.37 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 3.38% from 3.19%, with points increasing to 0.26 from 0.19 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
Separately, Zillow was out Wednesday with a report on rising rates and the impact they appear to be having on the housing market. It read, in part:
“The effect these recent mortgage rate movements are having on the housing market has been overshadowed by broader economic factors, and the most prominent impact may have already come to pass with the temporary boom in refinances.
“One sign of analysts’ reading of the market is Bank of America’s ratings downgrade for some of the nation’s largest home builders, suggesting the bank believes COVID-19 will harm consumer sentiment and slow home building. If correct, that dive in consumer sentiment would presumably slow sales activity regardless of mortgage rate movements as some would-be buyers turn down their risk tolerance and stay out of the market. Early data suggests this may be the case as real estate showings have dropped off steeply since March 11.
“Recent data on the economy at large have been less than encouraging as well, including a surge in weekly jobless claims. The Federal Housing Administration’s decision to implement a 60-day moratorium on foreclosures and evictions for many homeowners reduces the risk of a wave of foreclosures, which would likely drive down home values. There is no indication to this point that home values have been affected by the slowdown.”
“The U.S. housing market has entered truly uncharted territory, shaken by the COVID-19 pandemic and a corresponding, sharp economic contraction that has already caused millions of Americans to lose their jobs,” said Zillow Economist Jeff Tucker. “Rock-bottom mortgage rates have provided some small financial relief for homeowners and buyers, but it hasn’t been enough to avoid a slowdown. The big question at the moment is to what degree measures being taken by local, state and national legislators will help limit the number of foreclosures in the months ahead.”
