Mortgage application activity drops due to flat rates, seasonality

Mortgage applications decreased 5% from one week earlier as, absent any rate incentive, activity slowed because of the holiday season, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending Dec. 13 found that the refinance index decreased 7% from the previous week, although it was 135% higher than the same week one year ago. The refinance share of mortgage activity decreased to 62% of total applications from 62.4% the previous week.

"Mortgage rates were mostly unchanged, even as a potential trade deal between the U.S. and China caused rates to inch forward at the end of last week. With rates showing little meaningful movement, both refinance and purchase activity took a step back. As we move into the slowest time of the year for home sales, purchase application volume is declining but continues to outperform year-ago levels, when rates were much higher," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release.

"2019 was another year of inadequate housing supply in relation to demand. The good news is that the tide could be slowly turning for potential buyers. Housing starts and permits rose strongly in November, and homebuilder confidence has surged to a level not seen since 1999."

The seasonally adjusted purchase index decreased 2% from one week earlier, while the unadjusted purchase index decreased 6% compared with the previous week and was 10% higher than the same week one year ago.

Adjustable-rate mortgage activity decreased to 4.6% from 5% percent of total applications and the share of Federal Housing Administration-insured loan applications decreased to 13.7% from 13.9% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 12.9% from 12.4% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.5% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) remained unchanged at 3.98%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350), the average contract rate increased 6 basis points to 3.96%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.79%. For 15-year fixed-rate mortgages, the average increased 3 basis points to 3.4%. The average contract interest rate for 5/1 ARMs decreased to 3.28% from 3.52%.