Mortgage Applications Increase; MBA Doubles 2020 Refinance Forecast

Mortgage applications increased 55.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 6, 2020.

In response to the current interest rate environment, MBA now forecasts total mortgage originations to come in around $2.61 trillion this year – a 20.3 percent gain from 2019’s volume ($2.17 trillion). Refinance originations are expected to double earlier MBA projections, jumping 36.7 percent to around $1.23 trillion. Purchase originations are now forecasted to rise 8.3 percent to $1.38 trillion.

The Market Composite Index, a measure of mortgage loan application volume, increased 55.4 percent on a seasonally adjusted basis from one week earlier to the highest level since April 2009. On an unadjusted basis, the Index increased 54 percent compared with the previous week. The Refinance Index increased 79 percent from the previous week to the highest level since April 2009, and was 479 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 12 percent higher than the same week one year ago.

“Market uncertainty around the coronavirus led to a considerable drop in U.S. Treasury rates last week, causing the 30-year fixed rate to fall and match its December 2012 survey low of 3.47 percent. Homeowners rushed in, with refinance applications jumping 79 percent – the largest weekly increase since November 2008,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “With last week’s increase, the refinance index hit its highest level since April 2009. The purchase market also had a solid week, with activity nearly 12 percent higher than a year ago. Prospective buyers continue to be encouraged by improving housing inventory levels in some markets and very low rates.”

Added Kan, “Taking into the account the current economic situation and how much rates have fallen, MBA is nearly doubling its 2020 refinance originations forecast to $1.2 trillion, a 37 percent increase from 2019 and the strongest refinance volume since 2012. As lenders handle the wave in applications and manage capacity, mortgage rates will likely stabilize but remain low for now. This in turn will support borrowers looking to refinance or purchase a home this spring.”

The refinance share of mortgage activity increased to 76.5 percent of total applications from 66.2 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 5.9 percent of total applications.

The FHA share of total applications decreased to 6.9 percent from 9.3 percent the week prior. The VA share of total applications increased to 13.1 percent from 10.5 percent the week prior. The USDA share of total applications decreased to 0.3 percent from 0.4 percent the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to the lowest level since December 2012, equaling the lowest level in survey history at 3.47 percent, from 3.57 percent with points increasing to 0.27 from 0.26 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400) decreased to the lowest level since the series was added in 2011, 3.58 percent, from 3.63 percent with points decreasing to 0.20 from 0.21 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.57 percent from 3.74 percent, with points remaining unchanged at 0.25 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.90 percent from 3.03 percent, with points increasing to 0.26 from 0.24 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 3.02 percent from 3.12 percent, with points increasing to 0.25 from 0.14 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.