After a one-week increase in mortgage applications due to increased refinancing activity, volumes fell slightly again, although interest rates continued to favor borrowers.
The Mortgage Bankers Association's Market Composite Index, which tracks applications through a weekly survey of MBA members, declined by a seasonally adjusted 1.7% in the period ended July 30. On an unadjusted basis, the decrease was 2%. Compared to the same week's volumes in 2020, the seasonally adjusted index was 8.1% lower.
Although low interest rates have often spurred refinancing activity in 2021, the refinancing index fell 2% weekly and was 3% lower than the same week a year ago.
After the purchasing index fell to its lowest level since May 2020 in the previous week, it slipped a further 2% after seasonal adjustment. On an unadjusted basis, purchases were 2% lower than the previous week and 18% year-over-year.
"The volume of purchase requests continued to decline, reflecting the persistent shortage of inventory that continues to drive home prices up rapidly across the country," said Mike Fratantoni, senior vice president and chief economist of MBA, in a press release.
Research released this week has highlighted the impact of housing shortages on the market and buying sentiment. CoreLogic's June data showed that home prices have climbed to their highest level since 1979, with few signs of cooling anytime soon.
Refinancing accounted for 67.6% of the total volume for the week, down from 67.5%. The proportion of applications for adjustable rate mortgages was 3.4%, compared to 3.6% a week earlier.
The average mortgage amounts have also shrunk from week to week for all types of applications. The average loan was $ 345,300, down 3.5% from $ 357,700 in the previous reporting period. In refinancing, loan size averaged $ 321,900, 3.9% below the $ 335,000 average reported a week earlier. The average purchase credit level was $ 394,100, down from $ 404,200 the previous week – a 2.5% decrease.
Government sponsored loan applications took a similar share of volume as a week earlier. Federal Housing Authority-backed mortgages accounted for 9% of activity, unchanged from the previous week, while the proportion of applications received from the Veterans Administration climbed from 9.7% to 9.9%. The proportion of loans secured by the US Department of Agriculture was 0.5%, also unchanged from the previous week.
30-year compliant rate is falling again
More than a year after the coronavirus pandemic broke out, worries about the global spread of COVID-19 continue to affect the mortgage industry, preventing mortgage rates from rising significantly, Fratantoni said.
“Global rates fell last week as markets assessed recent Delta Concerns. 30 year mortgage rates fell below 3% in our survey for the first time since this February, giving many homeowners who have not yet refinanced an opportunity to cut their rates and payments, ”he said.
The average contract rate on 30-year fixed-rate mortgages with corresponding loan balances of $ 548,250 or less decreased to 2.97%. A week earlier, the interest rate was 3.01%. The contract rate on 30 year jumbo fixed rate loans with more than $ 548,250 in credit averaged 3.12%, up one basis point from 3.11% the previous week. The average contract rate on FHA-backed 30-year fixed-rate mortgages also rose to 3.08% from 3.03% the previous week. After falling to the lowest level since the MBA began its survey in 1990, the 15-year fixed rate average contract rate rose even further, declining an additional three basis points to 2.33% from 2, 36% compared to the week. The average of 5/1 variable rate mortgages rose to 2.93%, down from 2.81% a week earlier.