Mortgage Market End Of Week Recap: Mortgage Application Volumes Decline

by Brian Barker

There was a decrease in mortgage applications volume, according to the Mortgage Bankers Association’s (MBA) seasonally adjusted report to 1.8 percent from the previous week. The findings also put into consideration an adjustment for the Labor Day Holiday.

The Market Composite Index – a measure of mortgage loan application volume, fell 1.8 percent on a seasonally adjusted basis from the week prior. On an unadjusted basis, the index declined 13 percent from the previous week. The Refinance Index fell 6 percent from a week earlier to its lowest since December, 2000. There was an increase of 1 percent in the seasonally adjusted Purchase Index from the previous week. Compared with the week before, the unadjusted Purchase Index decreased 11 percent and was 4 percent higher than the same week a year ago.

There was a decline in the refinance volume, which is very rate – sensitive to 37.8 percent of total applications from 38.9 percent the week earlier. An increase to 6.4 percent of total applications in the adjustable-rate mortgage (ARM) volume was realized.

There was an increase to 10.4 percent in the FHA share of total applications from 10.2 percent a week earlier. The VA share of total applications moved up to 10.5 percent from 10.0 percent the previous week. The USDA share of total applications remained the same at 0.8 percent as the previous week.

An increase to 4.84 percent from 4.80 percent was realized in the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less), with points increasing to 0.46 from 0.43 (inclusive of the origination fee) for loans whose loan-to-value ratio (LTV) is 80 percent. There was a move up in the effective rate from the previous week.

There was an increase as well in the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) to 4.72 percent from 4.67 percent, with points moving upwards from 0.30 to 0.47 (inclusive of the origination fees) for loans with 80 percent loan-to-value ratio (LTV). There was an increase in the effective rate as well.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA went up to 4.84 percent from 4.79 percent, with points falling from 0.69 to 0.51 (inclusive of the origination fee) for the 80 percent LTV loans. The effective rate went down from the previous week.

Also, an increase to 4.28 percent from 4.23 percent was realized as well in the average contract interest rate for 15-year fixed-rate mortgages, with points moving upwards to 0.47 from 0.45 (inclusive of the origination fee) for loans of 80 percent loan-to-value ratio (LTV). The effective rate increased from the previous week as well.

The average contract interest rate for 5/1 ARMs fell from 4.09 percent to 4.07 percent, with points reducing to 0.30 from 0.31 (inclusive of the origination fees) for the 80 percent loan-to-value ratio loans. The effective rates also decreased from the previous week.

As Loan Volumes Fall, Homebuyers are Making Big Down Payments

Even as homebuyers acquiring loans deposit more money into the transactions, mortgage origination volume is continuing to fall.

According to Attom Data Solutions, the median down payment on condos and single-family homes purchased with financing reached its peak since 2000’s first quarter when the data was first recorded. At a median of $19,900, the 2018 second quarter was up 18 percent year-on-year from $16,925 and up 19 percent from the previous quarter’s $16,750.

Daren Blomquist, a senior vice president at Attom Data Solutions in a press release said, “Buyers are upping the ante when it comes to down payments, evidenced by the record-high median down payment for homes purchased in the quarter, and an increasing number of buyers are getting help from co-buyers.”

At 7.6 percent of the median sales price, the second-quarter down payment figure marked the highest percentage in nearly 15 years. It’s a move up from 6.6 percent of the median sales price for both year-on-year and quarter-on-quarter.

Larger down payments imply that homebuyers are financially sound, hence lenders can expect better repayment. However, it also means that lenders take on less risk, which translates into smaller loan amounts that drive interest earnings and loan officer commissions.

In the meantime, mortgage originations decreased for the third quarter consecutively as growth in purchase and home equity line of credit lending was overshadowed by a fall in refinance activity.

In the second quarter, more than 1.5 million loans secured by residential property were originated, reducing 27 percent year-on-year and 16 percent from the previous quarter.

Of all residential loans originated, purchase loans accounted for $926,516, a 1 percent year-on-year increase and a 39 percent rise from the earlier quarter. There was a decrease in refinance loan originations at $799,093 – a four-year low, down 2 percent from one year ago and less than 1 percent from the previous quarter.