Mortgage rates have been on a roller coaster ride for the past month, but a slight decrease in rates in the last week has boosted the mortgage market. Total mortgage applications increased as a result of the rates dropping.
On a seasonally adjusted basis for the week, total mortgage application volume rose 2.3 percent from the previous week. However, applications are still running at 23 percent below the levels for the same time a year ago, due to a massive drop in refinancing transactions.
Mortgage applications for refinance transactions did increase 2 percent for the week, seasonally adjusted, however, the numbers are still 40 percent lower than they were a year ago. This is due to the fact that rates are still higher than they were a year ago. Most borrowers decided to refinance their homes already, when rates hit a near record-low.
“Mortgage rates continued to show volatility from week to week, decreasing 4 basis points to 4.35 percent last week after two weeks of increases,” noted Joel Kan, an MBA economist. “Since reaching a recent peak of almost 4.5 percent toward the end of December, rates have bounced around the 4.3 percent mark for the past six weeks.”
The average interest rate for a 30-year fixed-rate mortgage with conforming loan balances (loan balances of $424,000 or less) decreased from 4.39 percent to 4.35 percent, with points remaining unchanged at 0.34 (including the origination fee) for loans with an 80 percent loan-to-value ratio.
Applications to purchase a home are less sensitive to the weekly move of rates. These applications rose 2 percent for the week and are at a 3.6 percent higher than they were a year ago. Demand for buyers has steadily increased, as the market is traditionally busy as spring approaches. However, the supply of homes is extremely low.
The share of total FHA applications decreased from 12.1 percent the prior week to 11.9 percent. The total was at 13.6 percent the week before the inauguration of President Donald Trump. The Trump’s administration’s reversal of a cut in annual premium on these government-insured loans is a major reason for the drop, in FHA applications.
The premium cut was not scheduled to go into effect until after the inauguration, however, borrowers jumped to file FHA applications immediately after the announcement of the cut in early January. Lenders also began underwriting those loans to lower premiums immediately, as well.