Low interest rates boosted mortgage activity last week after volume fell earlier in the month, although concerns about the US economic recovery remain, according to the Mortgage Bankers Association.
The MBA's Market Composite Index, a measure of mortgage activity based on a survey of association members, rose 1.6% seasonally adjusted for the weekly period ending August 20. The unadjusted index was also up 1%. Compared to the previous week, the seasonally adjusted total volume was 4.3% lower.
Both the pace of refinancing and purchases contributed to the increased activity. The refinancing index rose 1% from week to week and was 3% above its level in the same week of 2020. The seasonally adjusted purchase index rose 3% from the previous week, while the unadjusted index grew by 1%. The unadjusted purchasing volume was 16% below the previous year's figure.
"Lower interest rates resulted in an increase in refinance requests, with government loan applications increasing 10% to their highest level since May 2021," said Joel Kan, vice president of economic and industry forecasting for the MBA, in a press release.
Concerns about the extension of the pandemic kept interest rates low, Kan said, as markets held out before taking any major moves that could affect lending rates. "Government bond yields fell last week as investors continue to watch with fears as the surge in COVID-19 cases begins to dampen economic activity in several states," he said.
The average loan size shrank for the fourth straight week to $ 333,300 for all activities, down 1.7% from $ 339,200 the previous week. For refinances, the average loan amount was down 2.6%, down from $ 312,700 a week earlier to $ 304,600. The average purchase price also decreased 0.3% to $ 392,400 from $ 393,700 in the previous reporting period.
The decline in the average purchase loan size combined with growing application activity could suggest that first-time buyers looking for affordable homes are getting some relief thanks to the recent surge in inventories of both newly built and existing homes, Kan said the federal housing administration in particular took in Compared to the previous week, it accounts for a larger proportion of the total volume. FHA sponsored loans accounted for 11% of all activity, up from 9.4% a week earlier. However, the Veterans Administration mortgages fell, dropping their stake from 10.3% the previous week to 10%, while the percentage of US Department of Agriculture-supported claims remained unchanged at 0.4% weekly.
The refinancing share of all applications did not change weekly and also made up 67.3% of the total volume. The proportion of variable rate mortgages fell from 3.2% in the previous week to 3.1%.
Interest rates fall across all categories
After mortgage rates rose across the board just a week earlier, all categories went the other way, down, favoring borrowers
The average contract rate on 30-year fixed-rate mortgages with corresponding loan balances of $ 548,250 or less fell to 3.03% from 3.06% the previous week. The contract rate on 30 year jumbo fixed rate loans with balances greater than $ 548,250 averaged 3.13%, down six basis points from 3.19% the previous week's 3.1% from 3.15% a week ago. The average contract interest rate for 15-year fixed-rate mortgages fell to 2.38% after 2.41% in the previous reporting period.
The average contract rate for 5/1 adjustable rate mortgages continued its rocking motion, dropping to 2.68%. A week earlier, the 5/1 ARM was 2.9%. For the past three weeks the average has fluctuated between 22 and 40 basis points in each direction each week.