Climbing mortgage rates have slowed demand for refinance applications, while purchase applications remain strong moving into the spring season, according to the Mortgage Bankers Association.
This month, we’ll talk to mortgage leaders about where the market is headed and how products are evolving digitally to suit buyers’ needs now. We’ll also explore emerging alternative financing options that are changing the game for buyers and sellers. Join us for Mortgage and Alternative Financing Month.
As mortgage rates have continued to inch higher, homeowners are responding with slightly diminished enthusiasm in refinancing their mortgages, driving an overall decrease in weekly mortgage applications, according to data from the Mortgage Bankers Association (MBA).
Mortgage loan application volume, as measured through the Market Composite Index, dropped 1.3 percent from the week before on a seasonally adjusted basis, according to the MBA’s Weekly Mortgage Applications Survey for the week ending March 5, 2021. On an unadjusted basis, the Index declined 1 percent week over week.
The Refinance Index dropped 5 percent from the week before and was down 43 percent from the same time the previous year. Meanwhile, the seasonally adjusted Purchase Index rose 7 percent from the previous week. The unadjusted Purchase Index jumped 9 percent from the week before and was up 2 percent year over year.
“The 30-year fixed mortgage rate climbed to 3.26 percent last week, which is the highest since last July and up 40 basis points since the start of 2021,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “Signs of faster economic growth, an improving job market and increased vaccine distribution are pushing rates higher. The run-up in mortgage rates continues to cool demand for refinance applications. Activity declined last week for the fourth time in five weeks.”
Still with the Purchase Index showing strong gains, Kan noted that the spring market is sizing up to be a busy one.
“With the spring buying season at the doorstep, the purchase market had its strongest showing in four weeks, with gains in both conventional and government applications,” Kan added. “Overall activity was 2.4 percent higher than a year ago, and loan sizes moderated for the second straight week — potentially a sign that more first-time buyers are entering the market.”
Refinance mortgage activity declined from 67.5 percent of total applications the week before to 64.5 percent. Meanwhile, the adjustable-rate mortgage (ARM) share of activity rose to 3.0 percent of total applications.
The FHA share of total applications saw a modest decrease, from 12.1 percent the previous week to 11.6 percent. VA applications also decreased during this period from 12.3 percent of total applications the previous week to 11.1 percent. USDA applications stayed the same at 0.4 percent of all applications.
The average contract interest rate on 30-year fixed-rate mortgages with a conforming loan balance ($548,250 or less) rose from 3.23 percent to 3.26 percent with points declining from 0.48 to 0.43 (including origination fee) for 80 percent loan-to-value ratio (LTV) loans.
On those loans with jumbo loan balances (more than $548,250), the average contract interest rate on a 30-year fixed-rate mortgage rose slightly from 3.33 percent to 3.34 percent with points increasing from 0.41 the week before to 0.50 (including origination fee) for 80 percent LTV loans.
For 15-year fixed-rate mortgages, the average contract interest rate dropped slightly from 2.64 percent the week before to 2.63 percent with points also decreasing from 0.39 percent to 0.37 percent (including origination fee) for 80 percent LTV loans.