Mortgage applications decreased 4.2% over the final two weeks of 2020, but the strong demand for home buying throughout most of the year should continue, according to the Mortgage Bankers Association.
The MBA’s Weekly Mortgage Applications Survey for the week ending Jan. 1 found that the refinance index decreased 6%
For the week of Jan. 1, the refinance share was 73.5%, while for the week of Dec. 25, it was 72.9%.
“Mortgage rates started 2021 close to record lows, most notably with the 30-year fixed rate at 2.86%, and the 15-year fixed rate at a survey low of 2.4%. The record-low rates for fixed-rate mortgages is good news for borrowers looking to refinance or buy a home, as around 98% of all applications are for fixed-rate loans,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release. “Despite these low rates, overall application activity fell sharply during the holiday period — which is typical every year.”
The seasonally adjusted purchase index decreased 0.8% from two weeks ago, while the unadjusted purchase index decreased 30% compared with two weeks earlier and was 3% higher than the same week one year ago.
“The steady demand for home buying throughout most of 2020 should continue in 2021. MBA is forecasting for purchase originations to rise to $1.59 trillion this year — an all-time high,” Kan added.
According to the MBA’s December forecast, total volume for 2020 should end at around $3.6 trillion, of which $1.4 trillion was purchases. For 2021, the organization is looking at $2.8 trillion in total production.
While the changes to the index values were calculated to what they were two weeks ago, changes to application share and mortgage rates are to the week ended Dec. 25, MBA pointed out.
The share of Federal Housing Administration-insured loan applications remained unchanged from 10.1% the week prior.
Veterans Affairs-guaranteed loans saw their share increase to 13.6% from 12.1% and the U.S. Department of Agriculture/Rural Development share increased to 0.4% from 0.3% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 4 basis points to 2.86%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased by 1 basis point to 3.08%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased 5 basis points to 2.9%. For 15-year fixed-rate mortgages, the average decreased 2 basis points to 2.4%. The average contract interest rate for 5/1 ARMs increased 6 basis points to 2.63%.
