Last week, mortgage application volume decreased, continuing the up-one-week, down-the-next trend that began in late June. For the week of August 13, the Mortgage Bankers Association said that its Market Composite Index, which measures mortgage loan application volume, fell 4% seasonally adjusted and unadjusted.
The refinancing side of originations was hit the hardest. The Refinance Index dropped 5% in relation to the previous year. In addition, refinance applications stood for 67% of total applications, down from 68% the week before.
Mortgage rates rose above 3% for the first time in about a month, with the 30-year fixed-rate exceeding 3%. Last week, mortgage rates rose in tandem with Treasury yields, which began increasing after the positive July jobs report before pausing due to poor consumer mood and fears over mounting COVID-19 cases.
The rise in mortgage rates resulted in a 5% drop in refinancing, owing to a 7% drop in traditional refinance applications. The refinance index is roughly 8% lower. The number of homeowners who are eligible for a refinance has shrunk in recent years.
Purchase applications experienced mixed results as well with traditional purchases down and government purchases up. FHA loans, for example, are widely used by first-time purchasers. Despite a second consecutive weekly drop, average loan sizes remain at all-time highs. This hints that sales prices are still high, owing to fierce competition that has accelerated housing price growth.
The FHA’s percentage of total applications increased by more than 9%, while the VA’s share jumped by more than 10%. USDA applications made up 0.4% of all submissions. The average overage loan size was $339,000, while purchase loans averaged over $393,000.
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