Global| Aug 05 2020Mortgage Applications Fall Despite Declining Rates
by:Sandy Batten
|in:Economy in Brief
Summary
• Mortgage applications decreased 5.1% in week ending July 31. • Purchase applications off 7.5% from beginning of July, while refinance applications up 9.3%. • 15-year fixed rate mortgage interest rate edged down to 2.83%; 30-year [...]
• Mortgage applications decreased 5.1% in week ending July 31.
• Purchase applications off 7.5% from beginning of July, while refinance applications up 9.3%.
• 15-year fixed rate mortgage interest rate edged down to 2.83%; 30-year rate fell to new low.
The Mortgage Bankers Association reported that its total Mortgage Applications Index declined 5.1% w/w (+55.3% y/y) in the week ended July 31 on top of a 0.8% w/w decline in the previous week. Applications for loans to purchase a home decreased 1.8% (+21.5% y/y) following a 1.5% w/w decline the previous week. Loan applications for refinancing fell 6.8% w/w (+84.1% y/y) after having edged down 0.4% w/w the previous week. Applications climbed during the first half of July but have receded in the second half. The refinance share of mortgage activity decreased to 63.9% of total applications from 65.1% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 3.1% of total applications.
The effective interest rate on a 15-year fixed-rate mortgage edged down to 2.83% from 2.85% the previous week. It had reached a record low of 2.78% in the week ending July 10. Even though 10-year Treasury rates (the benchmark for mortgage rates) have been range-bound since early April, mortgage rates have been on the decline as risk premia--the compensation for lending in riskier markets--have fallen. The 30-year fixed rate fell to a new record low of 3.25% from 3.31% the previous week. The 30-year jumbo rate rose one basis point to 3.61%, still near its record low of 3.59% set in the week of July 17. The 5-year adjustable rate slipped to 3.07% from 3.12% the previous week.
The average mortgage loan size fell to $326,300 (1.5% y/y), down meaningfully from the early March high of $367,900. For purchases the average loan size rose to $366,500 (15.1% y/y) while refinancing loans fell to $303,700 (-6.4% y/y).
With fixed mortgage interest rates having fallen more than adjustable rates, applications for fixed-rate loans are up 57.8% y/y versus 3.0% y/y for adjustable rate mortgages.
The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.
| MBA Mortgage Applications (%, SA) | 07/31/20 | 07/24/20 | 07/17/20 | Y/Y | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Total Market Index | -5.1 | -0.8 | 4.1 | 55.3 | 32.4 | -10.4 | -17.8 |
| Purchase | -1.8 | -1.5 | 1.8 | 21.5 | 6.6 | 2.1 | 5.6 |
| Refinancing | -6.8 | -0.4 | 5.3 | 84.1 | 71.1 | -24.3 | -34.0 |
| 15-Year Effective Mortgage Interest Rate (%) | 2.83 | 2.85 | 2.80 |
3.54 |
3.71 | 4.35 | 3.59 |
Sandy Batten
AuthorMore in Author Profile »Sandy Batten has more than 30 years of experience analyzing industrial economies and financial markets and a wide range of experience across the financial services sector, government, and academia. Before joining Haver Analytics, Sandy was a Vice President and Senior Economist at Citibank; Senior Credit Market Analyst at CDC Investment Management, Managing Director at Bear Stearns, and Executive Director at JPMorgan. In 2008, Sandy was named the most accurate US forecaster by the National Association for Business Economics. He is a member of the New York Forecasters Club, NABE, and the American Economic Association. Prior to his time in the financial services sector, Sandy was a Research Officer at the Federal Reserve Bank of St. Louis, Senior Staff Economist on the President’s Council of Economic Advisors, Deputy Assistant Secretary for Economic Policy at the US Treasury, and Economist at the International Monetary Fund. Sandy has taught economics at St. Louis University, Denison University, and Muskingun College. He has published numerous peer-reviewed articles in a wide range of academic publications. He has a B.A. in economics from the University of Richmond and a M.A. and Ph.D. in economics from The Ohio State University.
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