Mortgage applications dip as refinance activity grows

"The seasonally adjusted purchase index decreased 5% from one week earlier. The unadjusted purchase index also decreased 5% compared with the previous week and was 20% higher than the same week one year ago. The lowest mortgage rates in a month spurred an increase in refinance activity, including another pickup in ARM applications. The 30-year fixed rate decreased to 6.37% and all other loan types also decreased, said Joel Kan, MBA's vice president and deputy chief economist."

"The refinance index increased 4%, driven by a 6% increase in conventional refinances and a 12% increase in FHA refinance applications, as borrowers remain attentive to these opportunities to lower their monthly mortgage payment. VA refinances bucked the trend and were down 12%. ARM applications increased 16% over the week, which pushed the ARM share to 11%, with the ARM rate more than 80 basis points lower than the 30-year fixed rate."

"Purchase applications were down over the week but remained 20% higher than a year ago, Kan added. By product type, the Federal Housing Administration (FHA) share of total applications continued its upward trajectory, increasing to 21.8% of applications compared to 20.5% the week prior. Meanwhile, the U.S. Department of Veterans Affairs (VA) share of total applications decreased to 13.5%, down from 14.9% the week prior, and the U.S. Department of Agriculture (USDA) share of total applications dropped from 0.4% to 0.3% during the week."

Seasonally adjusted and unadjusted purchase indexes each declined 5% week-over-week, though unadjusted purchases remained 20% higher than a year earlier. Lower mortgage rates — including a 30-year fixed rate at 6.37% and declines across jumbo, FHA, 15-year fixed and 5/1 ARM rates — prompted a 4% rise in the refinance index. Conventional refinances rose 6% and FHA refinances rose 12%, while VA refinances fell 12%. ARM applications increased 16%, raising the ARM share to 11% as ARM rates sit more than 80 basis points below the 30-year fixed. FHA share grew to 21.8%; VA and USDA shares fell slightly.

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