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Low rates can't halt decline in loan demand


Ten-month lows in key interest rates couldn’t stop mortgage applications declining for the third straight week, the Mortgage Banking Association (MBA) reported this morning.

For the week ending Feb. 1, the MBA’s Market Composite Index — a measure of mortgage loan application volume — decreased by 2.5 percent on a seasonally adjusted basis from one week earlier. Compared to last year, loan volume was down nearly 10 percent. The Index increased by 12 percent without seasonal adjustments.

mortappsPurchase volume showed the biggest hit, with MBA’s Purchase Index down by 5 percent (seasonally adjusted) from the previous week. Unadjusted, the Purchase Index rose by 13 percent from the previous week, but was 2 percent lower than the same week in 2018.

The unadjusted Refinance Index, on the other hand, increased by 5 percent from one week earlier. The refinance share of mortgages fell marginally to 41.6 percent, down from 42 percent the previous week.

MBA noted the drop in demand despite the average interest rate for 30-year fixed-rate mortgages with conforming balances decreasing to 4.69 percent. That rate, the lowest since last April, was down from 4.76 percent a week earlier. Points were also down, decreasing to 0.45 from 0.47 (including origination fees) for 80 percent LTV loans. 

Other interest rates saw similar decreases. The average rate for 30-year fixed-rate jumbo loans decreased to 4.5 percent from 4.6 percent, with points increasing to 0.28 from 0.24 (including origination fees) for 80 percent LTV (loan to value) loans. The average rate for 30-year fixed-rate Federal Housing Administration (FHA) mortgages fell to 4.7 percent from 4.77 percent, with points falling to 0.57 from 0.58 (including origination fees) for 80 percent (LTV) loans. For 15-year fixed rate mortgages, the average interest rate decreased to 4.11 percent from 4.16 percent, with points up to 0.47 from 0.46 (including origination fees) for 80 percent LTV loans.

"Despite more favorable borrowing costs, and after a three-week surge in activity, purchase applications have slowed over the past two weeks, and are now almost 2 percent lower than a year ago," said Joel Kan, MBA associate vice president of Industry Surveys and Forecasting.

Kan added, however, that the robust job market and moderation in price gains should signal future purchase growth.

Questions? Contact Arnie Aurellano at (425) 984-6019 or arniea@scotsmanguide.com. 



 

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