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Economy in Brief

Mortgage Loan Applications Decline as Interest Rates Increase
by Tom Moeller  August 19, 2020

• Mortgage demand wavers.

• Applications to refinance an existing loan decline while purchase applications rise.

The Mortgage Bankers Association reported that its total Mortgage Applications Index fell 3.3% (+34.3% y/y) during the week ended August 14 and reversed half of the prior week's increase. A 5.3% decline (+38.3% y/y) in applications to refinance an existing loan accounted for the fall as it followed the prior week's 9.1% increase. Home purchase applications edged 0.8% higher (26.7% y/y) following a 2.0% increase in the previous week.

The pull-back in loan demand occurred as interest rates increased last week. The effective interest rate on a 30-year fixed-rate mortgage rose to 3.23% and reversed the prior week's decline to 3.16%. The 15-year fixed rate rose to 2.82% and also reversed the prior week's decline. The 30-year jumbo rate edged higher to 3.52%. Holding steady was the 5-year adjustable rate at 3.11%.

The average mortgage loan size was little changed w/w at $326,800 (-5.2% y/y), down sharply from the early-March high of $367,900. For purchases, the average loan size rose to $367,800 (13.7% y/y) from $364,300. The average refinancing loan size eased to $304,300 (-14.9% y/y) from $306,500.

Applications for fixed-rate loans rose 39.5% y/y while applications for adjustable rate mortgages declined 43.3% 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) 08/14/20 08/07/20 07/31/20 Y/Y 2019 2018 2017
Total Market Index -3.3 6.8 -5.1 34.2 32.4 -10.4 -17.8
  Purchase 0.8 2.0 -1.8 26.7 6.6 2.1 5.6
  Refinancing -5.3 9.1 -6.8 38.3 71.1 -24.3 -34.0
30-Year Effective Mortgage Interest Rate (%) 3.23 3.16 3.25

(Aug '19)

4.34 4.94 4.32
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