Mortgage Applications in U.S. Spike 49 Percent in Early January

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According to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending January 9, 2015, mortgage applications increased 49.1 percent from one week earlier.

The Market Composite Index, a measure of mortgage loan application volume, increased 49.1 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index increased 119 percent compared with the previous week.

The Refinance Index increased 66 percent from the previous week to the highest level since July 2013.  The seasonally adjusted Purchase Index increased 24 percent from one week earlier to the highest level since September 2013. The unadjusted Purchase Index increased 83 percent compared with the previous week and was 2 percent higher than the same week one year ago.

"The US economy and job market continued to show signs of strength, but weakness abroad and tumbling oil prices have led to further declines in longer-term interest rates," said Mike Fratantoni, MBA's Chief Economist. 

"Mortgage rates reached their lowest level since May of 2013, and refinance application volume soared, more than doubling on an unadjusted basis, and up 66 percent after adjusting for the fact that the previous week included the New Year's holiday.  Conventional refinance volume increased to a greater extent than government refinance volume.  Applications for larger refinance loans increased more than 4 times relative to the previous week.  The average conventional refinance application increased to $298,700 from $233,500 the prior week.  Although there was a somewhat smaller increase for government refinance volume, VA refinance applications increased by 50 percent.  VA loans tend to be larger than FHA and USDA loans, and hence are more responsive to a given rate change."

"In addition to the drop in rates, and news of improvement in the job market, there was additional positive news for prospective homebuyers with evidence that credit availability has increased somewhat, and with FHA's announcement of a decrease in their mortgage insurance premiums.  Purchase application volume increased by almost 24 percent, with stronger growth for conventional applications than for government loans.   Purchase application volume was at its highest level since September 2013, increased on a year over year basis in the aggregate, and notably increased across most loan size categories, particularly for the conforming, middle of the market loan segments that had been weak for much of the past year.  FHA purchase application volume was up by 17 percent for the week on a seasonally adjusted basis."

The refinance share of mortgage activity increased to 71 percent of total applications from 65 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9 percent of total applications.

The FHA share of total applications decreased to 7.5 percent this week from 9.3 percent last week.  The VA share of total applications decreased to 9.7 percent this week from 10.7 percent last week.  The USDA share of total applications decreased to 0.8 percent from 0.9 percent last week.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.89 percent, the lowest level since May 2013, from 4.01 percent, with points decreasing to 0.23 from  0.28 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to 3.88 percent, the lowest level since May 2013, from 3.99 percent, with points decreasing to 0.23 from 0.24 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.71 percent, the lowest level since May 2013,  from 3.81 percent, with points decreasing to -0.05 from -0.03 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.16 percent, the lowest level since May 2013, from 3.24 percent, with points remaining unchanged at 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 2.94 percent, the lowest level since October 2014, from 3.19 percent, with points decreasing to 0.46 from 0.51 (including the origination fee) for 80 percent LTV loans.  The effective rate decreased from last week.