Mortgage applications increased 0.8% from one week earlier, an indicator of the housing market’s strength as this year comes to an end, according to the Mortgage Bankers Association.
The MBA’s Weekly Mortgage Applications Survey for the week ending Dec. 18 found that the refinance index increased 4%
“Mortgage rates are closing the year at record lows. The 30-year fixed rate — at 2.86% — is a full percentage point below a year ago. Last week’s increase in refinance applications was driven by FHA and VA activity, while conventional refinances saw a slight decline. Overall refinance activity was 124% higher than in 2019, as borrowers continue to seek lower monthly payments or different loan terms,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release. “Purchase applications decreased for the second time in three weeks, as both conventional and government applications saw a drop-off.”
The seasonally adjusted purchase index decreased 5% from one week earlier, while on an unadjusted basis it decreased 7% compared with the previous week although it was 26% higher than the same week one year ago.
“There are still signs of relative strength in the housing market as 2020 ends. However, housing affordability will be worth monitoring next year. The lower loan size segment of the market — particularly for entry-level and first-time buyers — continues to be impacted by rapidly increasing home prices and tight inventory,” Kan added.
Adjustable-rate mortgage activity increased to 1.9% from 1.8% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 11.5% from 11% the week prior.
Veterans Affairs-guaranteed loans saw their share increase to 13.8% from 12.1% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.4% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased a basis point to 2.86%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased 2 basis points to 3.1%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 6 basis points to 2.9%. For 15-year fixed-rate mortgages, the average decreased 6 basis points to 2.43%. The average contract interest rate for 5/1 ARMs increased to 2.71% from 2.58%.
Because the MBA’s offices are closed for the holiday season, the next release of the application survey’s data will be on Jan. 6.
