Mortgage application volume rose last week, but with the 10-year Treasury yield tanking in recent days, growth in refinancings for the current period is quite likely, according to the Mortgage Bankers Association.
"As fears regarding the coronavirus have increased, Treasury yields have dropped to record lows this week amid the ensuing financial market volatility. Next week's results will show the impact this drop in Treasuries had on mortgage activity," Mike Fratantoni, the MBA's chief economist, said in a press release.
The 1.5% seasonally adjusted week-to-week increase in new applications was driven by gains in purchase volume.
At the same time, the MBA's Weekly Mortgage Applications Survey for the week ending Feb. 21 found that the refinance index decreased 1%
"Last week appears to have been the calm before the storm. Weaker readings on economic growth caused a slight drop in mortgage rates, bringing them back to their level two weeks ago, but applications overall moved 1.5% higher," said Fratantoni.
"Refinance applications for conventional loans dropped a bit, but FHA refinances increased more than 22%. Purchase volume remained strong, supported both by low rates and the increased pace of construction over the past few months," he continued. "With housing supply at low levels, new inventory is a positive development for prospective homebuyers."
The seasonally adjusted purchase index increased 6% from one week earlier, while the unadjusted purchase index decreased 1% compared with the previous week and was 10% higher than the same week one year ago.
Adjustable-rate mortgage activity decreased to 5.3% from 5.4% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 10.5% from 9.5% the week prior.
The share of applications for Veterans Affairs-guaranteed loans decreased to 11.8% from 12.1% and the U.S. Department of Agriculture/Rural Development share increased to 0.5% from 0.4%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 4 basis points to 3.73%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased 7 basis points to 3.72%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 2 basis points to 3.84%. For 15-year fixed-rate mortgages, the average decreased 4 basis points to 3.18%. The average contract interest rate for 5/1 ARMs decreased 2 basis points to 3.21%.
