Mortgage Rate Drop Adds to New Loan Applications

24/7 Wall St.

The Mortgage Bankers Association (MBA) released its weekly report on mortgage applications Wednesday morning, noting an increase of 5.3% in the group's seasonally adjusted composite index. That followed a drop of 5.9% for the previous week. Mortgage loan rates fell slightly last week on all types of mortgage loans.

The seasonally adjusted purchase index increased by 9% from the prior week's report. On an unadjusted basis, the composite index increased by 6% week-over-week. The unadjusted purchase index jumped 10% for the week, but it remains 16% lower year-over-year.

Adjustable rate mortgage loans account for 9% of all applications, up one point from last week.

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The MBA's refinance index increased by 2%, after dropping by 7% in the previous week. The share of refinancings fell from 50% to 49% of all applications.

The average mortgage loan rate for a conforming 30-year fixed-rate mortgage decreased from 4.49% to 4.43%. The rate for a jumbo 30-year fixed-rate mortgage fell from 4.37% to 4.29%. The average interest rate for a 15-year fixed-rate mortgage decreased from 3.53% to 3.52%.

The contract interest rate for a 5/1 adjustable rate mortgage loan slipped from 3.26% to 3.21%. Rates on a 30-year FHA-backed fixed rate loan fell from 4.17% to 4.13%.

The MBA's chief economist noted:

It is official: we are in a majority purchase market for the first time since 2009. A sizeable increase in purchase applications last week likely reflected the impact of somewhat lower mortgage rates as well as continued growth in the job market, as confirmed by Friday’s employment report from the BLS. Despite the strong increase in the purchase market last week, volume continues to run 16 percent behind last year's pace.

Mortgage lenders are now buoyed by the fact that purchase applications outnumber applications for refinancing. Generally speaking, this is good news for economic growth, but there have been plenty of other signs of a slowdown in the housing market.

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