Mortgage applications increased 16.7% from one week earlier to their highest level in 10 months, although rates rose in expectation of additional government pandemic relief, according to the Mortgage Bankers Association.
Total mortgage application volume reached its highest level since March 2020, led by “booming refinance activity,” which was also the most seen since that same month, said Joel Kan, the MBA’s associate vice president of economic and industry forecasting, in a press release. Applications for government-guaranteed refinancings had their strongest week since June 2012.
The MBA’s Weekly Mortgage Applications Survey for the week ending Jan. 8 found that the refinance index increased 20% from the previous week and was 93% higher than the same week one year ago. The refinance share of mortgage activity increased to 74.8% of total applications from 73.5% the previous week. The previous week’s results included an adjustment for the holidays.
“The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, drove Treasury yields and rates higher. The 30-year fixed mortgage rate climbed 2 basis points to 2.88%, but reversing the trend, the 15-year fixed rate ticked down to 2.39%, a record low,” said Kan. “Even with the rise in mortgage rates, refinancing did not slow to begin the year."
The seasonally adjusted purchase index increased 8% from one week earlier, while the unadjusted purchase index increased 60% compared with the previous week and was 10% higher than the same week one year ago.
“Sustained housing demand continued to support purchase growth. The lower average loan balance observed was partly due to a 9.2% increase in FHA applications, which is a positive sign of more lower-income and first-time buyers returning to the market,” Kan added.
The average overall loan size applied for was $320,300 and for a purchase was $374,700, where for the week ended Jan. 1 it was $322,800 and $378,500, respectively.
Adjustable-rate mortgage activity decreased to 1.6% of total applications, while the share of Federal Housing Administration-insured loan applications decreased to 9.6% from 10.1% the week prior.
Veterans Affairs-guaranteed loans saw their share increase to 15.8% from 13.6% and the U.S. Department of Agriculture/Rural Development share remained unchanged from 0.4% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased 4 basis points to 2.88%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 9 basis points to 3.17%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 3 basis points to 2.93%. For 15-year fixed-rate mortgages, the average decreased a basis point to 2.39%. The average contract interest rate for 5/1 ARMs increased 3 basis points to 2.66%.