Mortgage application volume increased 15.1% from one week earlier, and with interest rates still falling, even higher refinance demand is probable in the short term, according to the Mortgage Bankers Association.
The MBA's Weekly Mortgage Applications Survey for the week ended Feb. 28 found that the refinance index increased 26% from the previous week and was 224% higher than the same week one year ago. The results for the week of Feb. 21 included an adjustment for the Presidents' Day holiday.
The refinance share of mortgage activity increased to 66.2% of total applications from 60.8% the previous week.
"The 30-year fixed-rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility. Refinance demand jumped as a result, with conventional refinance applications increasing more than 30%," Mike Fratantoni, the MBA's senior vice president and chief economist, said in a press release. "Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize."
For the first time ever on March 3, the 10-year Treasury yield broke below 1%. Overnight, the yield fell as low as 0.933%, before rising again above 1%. But when the market opened on March 4, it was at 0.997% and dropped to 0.952% in the first half-hour of trading.
Based on a strong January purchase market, industry economists had been bullish on the upcoming peak home buying season. Could the headlines over the coronavirus spread hold people back?
"We are now at the start of the spring home buying season. While purchase applications were down a bit for the week, they are still up about 10% from a year ago. The next few weeks are key in whether these low mortgage rates bring in more buyers, or if economic uncertainty causes some home shoppers to temporarily delay their search," Fratantoni said.
The seasonally adjusted purchase index decreased 3% from one week earlier, while the unadjusted purchase index increased 11% compared with the previous week and was 10% higher than the same week one year ago.
Adjustable-rate mortgage activity increased to 6.4% form 5.3%, while the share of Federal Housing Administration-insured loan applications decreased to 9.3% from 10.5% the week prior.
The share of applications for Veterans Affairs-guaranteed loans decreased to 10.5% from 11.8% and the U.S. Department of Agriculture/Rural Development share decreased to 0.4% from 0.5% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.57% from 3.73%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate remained unchanged at 3.72%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.74% from 3.84%. For 15-year fixed-rate mortgages decreased to 3.03% from 3.18%. The average contract interest rate for 5/1 ARMs decreased to 3.12% from 3.21%.
