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Economy in Brief

U.S. Mortgage Loan Applications Now Down 39% from Early March High
by Gerald D. Cohen  June 3, 2020

• Mortgage applications decreased 3.9% in week ending May 29.

• Refinancing applications dropped 8.6%, the seventh consecutive weekly decline.

The Mortgage Bankers Association reported that its total Mortgage Applications Index decreased 3.9% (+71.8% year-on-year) during the week ending May 29. Applications to purchase a home increased 5.3% (16.9% y/y), while refinance activity fell 8.6% (+137.1% y/y), the seventh consecutive weekly decline. Total mortgage applications are now down 38.8% from the 11-year high reached in early March; refinancing has fallen 50.7%, while purchase is down just 5.6% from its late-January high.

The effective interest rate on a 15- and 30-year fixed-rate mortgages decreased to seven-year lows of 2.92% and 3.46% respectively. While Treasury rates have been flat-to-up since early April mortgage rates have continued to fall as risk premia -- the compensation for lending in riskier markets -- have declined. Thirty-year jumbo rates were down to 3.75%, but remain above their early March lows. Five-year adjustable rates increased five basis points to 3.14% despite similar maturity Treasury rates edging down two basis points.

The average mortgage loan size rose to $319,000 (-6.4% y/y), but is down meaningfully from the early-March high of $367,900. For purchases and refinancings, the average loan size edged up to $342,900 and $302,700 respectively (+3.9%; -14.9% y/y).

With fixed mortgage interest rates falling substantially more than adjustable rates, applications for fixed-rate loans are up 78.4% y/y while adjustable rate mortgages are down 15.0% y/y.

The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's SURVEYW database.

MBA Mortgage Applications (%, SA) 05/29/20 05/22/20 05/15/20 Y/Y 2019 2018 2017
Total Market Index -3.9 2.7 -2.6 71.8 32.4 -10.4 -17.8
  Purchase 5.3 8.6 6.4 16.9 6.6 2.1 5.6
  Refinancing -8.6 -0.2 -6.3 137.1 71.1 -24.3 -34.0
15-Year Effective Mortgage Interest Rate (%) 2.92 2.94 2.95

(May '19)

3.71 4.35 3.59
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