Mortgage volumes rise again boosted by both purchases and refinances

After consecutive weeks of declines in mortgage applications, increases in both purchase and refinancing activity lifted total volume up for the first time since mid May, thanks to low interest rates, the Mortgage Bankers Association reported.

The Market Composite Index, which tracks mortgage-loan applications based on the association’s survey data, climbed 4.2% on a seasonally adjusted basis week over week for the period ending June 11. The unadjusted change came in as a 15% increase compared with the previous holiday-shortened week. Total seasonally adjusted mortgage activity was 20.6% lower than the same week one year ago, when a flurry of economic activity accompanied reopenings in many parts of the country affected by Covid-19.

The Refinance Index posted 6% higher than the prior week’s level but was 22% lower than the same week in 2020. The surge in refinances was the result of the 30-year fixed rate falling to its lowest point since early May, said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a press statement.

“U.S. Treasury yields have slid because of the uncertainty in the financial markets regarding inflation and how the Federal Reserve may act over the next few months,” said Kan. Interest rates correlate with fluctuations in yields.

The Purchase Index also showed a weekly increase, up 2% seasonally adjusted, and 11% unadjusted. Unadjusted volume of purchase mortgages came in 17% lower from the same week in 2020. An increase in government-sponsored purchase applications drove most of the week’s gain, according to Kan.

Gains were seen in both conventional and government-backed applications, up 3.3% and 7.3% for the week, seasonally adjusted, but down 19% and 25.7% from their levels a year ago.

Refinances and government loans increase volume shares
While a shortage of housing supply has stymied the hopes of many potential home buyers in the first half of 2021, refinancing activity has taken up much of the slack in volume, despite a May dip. After three weeks of declines, the refinance share of total mortgage volume climbed to 61.7%, up from 60.4% the prior week.

The share of mortgages backed by the Federal Housing Authority accounted for 9.6% of total applications, up from 9.5% a week earlier. Veterans Administration-guaranteed loans took an 11.5% share of volume, increasing from 11.2% week over week. The share of U.S Department of Agriculture-backed loans also increased slightly to 0.5% from 0.4%.

Adjustable-rate mortgages amounted to 3.8% of total share, decreasing from 3.9% the week prior.

Average purchase amount shrinks, but refinance size grows
The average dollar size of mortgage applications retreated slightly week over week, falling to $337,800 from $338,000 a week earlier. Average purchase amounts declined 1.7% to $400,000 from $407,000, brought down primarily due to the increase in government-backed purchase loans for the week, Kan noted. The average size of refinances, however, grew to $299,200 from $292,900, up 2.2%.

Average interest rates

• The average contract interest rate of 30-year fixed-rate mortgages with conforming loan balances of $548,250 or less dropped to 3.11%, compared to 3.15% a week earlier.
• The average contract interest rate of 30-year fixed-rate jumbo loans (with balances greater than $548,250) also decreased to 3.20%, down from 3.29% the previous week.
• The average contract interest rate of 30-year fixed-rate mortgages backed by the Federal Housing Authority increased to 3.14% from 3.12% a week earlier.
• The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.49% from 2.52% the prior week.
• The average contract interest rate for 5/1 adjustable-rate mortgages average increased to 2.69% from 2.54% week over week.