Applications Go Down While Interest Rates Go Up

According to the MBA Weekly Applications Survey, applications dropped slightly. The Survey found that for the week ending on March 31, applications dropped 1.6 percent from the previous week. The Market Composite Index showed that on an unadjusted basis, applications dropped 1 percent from the previous week, compared to the 1.6 percent adjusted.

Additioanlly, refinance activity dropped to 42.6 percent of total applications, from 44 precent the previous week. Despite the drops, the average loan size reached $318,200, a survey high.

The FHA share of total applications increased to 11.1 percent from 10.8 percent the week prior, and the VA share of total applications increased to 11.1 percent from 11.0 percent the week prior.

The MBA’s previous reports saw similar change, as the previous Market Composite Index dropped 0.8 percent from the previous week. The refinance share of mortgage activity dropped to 44 percent of total applications, marking the lowest level of refinance activity since October 2008.

Drops in applications are closely tied with the increase in rates, especially among mid-priced homes. Interest rates for 30-year fixed-rate mortgages with conforming loan balances increased from 4.33 percent to 4.34 percent during that week, but the average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances saw a decrease to 4.24 percent from 4.26 percent.

Previously, the Federal Housing Finance Agency (FHFA) reported month-over-month increases in interest rates, by 8 basis points from January to February. The average interest rate on conventional, 30-year fixed-rate mortgages of $424,100 or less was 4.41 percent, 4 basis points above the 4.37 percent in January.

Despite the steady weekly decline, February’s rates were still higher than January’s. The national average contract mortgage rate for the purchase of previously occupied homes by combined lenders index according to the FHFA was 4.27 percent for loans closed in late February, up 5 basis points from 4.22 percent in January, while the average interest rate on all mortgage loans was 4.25 percent, up 8 basis points from 4.17 in January.