Mortgage applications decrease due to economic uncertainty

Mortgage applications decreased 17.9% from one week earlier, as coronavirus-related volatility affected consumer sentiment, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending April 3 found the refinance index decreased 19% from the previous week and was 144% higher than the same week one year ago. The refinance share of mortgage activity decreased to 74.2% of total applications from 75.9% the previous week.

"Mortgage applications fell last week, as economic weakness and the surge in unemployment continues to weigh heavily on the housing market. Purchase activity declined again, with the index dropping to its lowest level since 2015 and now down 33% compared to a year ago," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release.

The economic turmoil particularly affected applications for loan balances above the conforming limits.

"With much less liquidity and tighter credit in the jumbo market, average loan sizes declined, and mortgage rates for jumbo loans increased to a high last seen in January," Kan said. "Given the ongoing rate volatility, along with the persistent lack of liquidity in certain sectors of the MBS market, we expect to see continued weekly swings in refinance activity."

The seasonally adjusted purchase index decreased 12% from one week earlier, while the unadjusted purchase index decreased 12% compared with the previous week.

Adjustable-rate mortgage activity increased to 3.3% from 3.2% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 10.6% from 9.1% the week prior.

The share of applications for Veterans Affairs-guaranteed loans increased to 14.3% from 12.5% the week prior and the U.S. Department of Agriculture/Rural Development share remained unchanged 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) increased 2 basis points to 3.49%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 3 basis points to 3.87%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 3 basis points to 3.54%. For 15-year fixed-rate mortgages, the average decreased 1 basis point to 3.04%. The average contract interest rate for 5/1 ARMs increased 4 basis points to 3.39%.