Mortgage applications decrease after strong start for new year

Mortgage application activity slowed down this past week from its fast start to 2020, with a decrease of 1.2% from one week earlier, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending Jan. 17 found that the refinance index decreased 2% from the previous week and was 116% higher than the same week one year ago. The refinance share of mortgage activity decreased to 61.6% of total applications from 62.9% the previous week.

"Mortgage applications dipped slightly last week after two weeks of healthy increases, but even with a slight decline, the total pace of applications remains at an elevated level," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The purchase market has started 2020 on a strong note, running 8% higher than the same week a year ago."

The seasonally adjusted purchase index decreased 2% from one week earlier, while the unadjusted purchase index increased 4% compared with the previous week.

"Refinance applications remained near the highest level since October 2019, as the 30-year fixed rate was unchanged at 3.87%, while the 15-year fixed rate decreased to its lowest level since November 2016," Kan said. "Even with more positive developments surrounding the U.S. and China trade negotiations and healthy retail sales data, investors seemed cautious and maintained their demand for safer U.S. Treasuries, which kept yields lower. Our expectation is that rates will stay along this same narrow range."

Adjustable-rate mortgage activity increased to 4.6% from 4.5% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 11.3% from 12.7% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 13.8% from 12.1% and the U.S. Department of Agriculture/Rural Development share remained unchanged at 0.5%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) remained unchanged at 3.87%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 4 basis points to 3.87%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.78%. For 15-year fixed-rate mortgages, the average decreased 5 basis point to 3.25%. The average contract interest rate for 5/1 ARMs decreased 6 basis points to 3.29%.