Mortgage applications increased sharply from the previous week, ending June 5, 2015. According to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey, applications were up almost eight and a half percent from the prior week. The results were adjusted accordingly for the Memorial Day holiday, which was Monday, May 25th, 2015. Calculations assume that most application activity ceased on this day until resuming on Tuesday.
The Market Composite Index, a measure of mortgage loan application volume, showed the actual increase to be 8.4%, calculated on a seasonally adjusted basis from one week earlier. On an unadjusted scale, the Index increased 19% compared with the same week from the prior year.
The Refinance Index rose seven percent from the previous week. The seasonally adjusted Purchase Index rose ten percent from one week earlier. The unadjusted Purchase Index rose twenty percent compared with the previous week and was fifteen percent higher than the same week one year ago. These parallel strong increases further support the validity of the data, when the curves are graphed; showing consistent strength across broad housing markets.
Economists are impressed by the fact that mortgage application volume actually rebounded in the week following the Memorial Day holiday, indicating that the holiday had a larger positive impact on business activity than what would normally be expected. Comparing volume over the past two weeks, purchase activity is up over six percent, while refinance activity is down five percent. Strong job growth throughout the month of May coupled with signs of wage growth are showing support in the purchase market.
Oddly, refinance mortgage activity remained at 49% of total applications from previous week; but this is not viewed as irregular. Rather, is supports the idea that buyer are driving the market today by taking advantage of favorable purchase conditions. A steady refinance market, therefore, serves as a backbone and foundation to the overall upward trends. In fact, adjustable-rate mortgage (ARM) activity, typically seen as a show of confidence by buyers that the market will continue to improve, increased to 6.3% of total applications.
The FHA share of total applications decreased to 14.3% from 14.9% the week prior. The VA share of total applications decreased to 11.5% from 12.0% the week prior. The USDA share of total applications increased to 1.1% from 1.0% the week prior. Although the VA loans showed a decrease, this can be viewed as a stronger market presenting even better borrowing options for these veterans.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances, meaning those with loan amounts of $417,000 or less, increased to 4.17%, its highest level since November 2014, from 4.02%, with points increasing to 0.38 from 0.33 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances, meaning those greater than $417,000, increased to 4.15%, its highest level since October 2014, from 4.01%, with points increasing to 0.37 from 0.30 (including the origination fee) for 80% LTV loans.