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Economy in Brief

Decline in Refinancing Drags Down U.S. Mortgage Applications
by Sandy Batten  January 20, 2021

• Purchase applications up but overwhelmed by decline in refinancing applications.

• Mortgage interest rates generally rose, reflecting rise in most market rates.

The Mortgage Bankers Association Mortgage Loan Applications Index fell 1.9% w/w (+56.2% y/y) in the weekend January 15 after having jumped up 16.7% w/w in the previous week. A 4.7% w/w decline (+86.7% y/y) in applications for refinance, following a 20.1% w/w surge in the previous week, led the overall decline. Applications for purchase rose 2.7% w/w (+16.9% y/y) on top of an 8.0% w/w rise in the previous week. Purchase applications are now at their highest level since November 2008. The refinance share of mortgage activity decreased to 72.3% of total applications from 74.8% in the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 2.1% of total applications.

The expectation of additional fiscal stimulus from the incoming administration, and the rollout of vaccines improving the outlook, have boosted yields on longer-term government debt, which is also being reflected in slightly higher mortgage interest rates. In the week ended January 15, the effective interest rate on a 30-year mortgage rose six basis points to 3.03%, the highest rate since mid-November. The effective 15-year rate jumped up nine basis points to 2.56%, its highest in five weeks. The effective rate for a 30-year Jumbo mortgage edged up two basis points to 3.27%. The rate on a five-year ARM increased eight basis points to 2.88%.

The average mortgage loan size increased 2.2% w/w to $327,400 in the week ended January 15. The average size of a purchase loan rose 2.5% w/w to $384,000, just $2,500 below the record set in late December. The average size of a refinanced loan gained 1.2% w/w to $305,700.

Applications for fixed-rate loans fell 2.3% w/w (+60.3% y/y) and applications for adjustable-rate mortgages increased jumped 24.2% w/w (-29.7% y/y) in the week ended January 15.

This 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) 01/15/21 01/08/21 01/01/21 Y/Y 2020 2019 2018
Total Market Index -1.9 16.7 1.7 56.2 63.0 32.4 -10.4
  Purchase 2.7 8.0 -1.6 16.9 11.4 6.6 2.1
  Refinancing -4.7 20.1 3.0 86.7 111.0 71.1 -24.3
30-Year Effective Mortgage Interest Rate (%) 3.03 2.97 2.96 3.92

(Jan '20)

3.40 4.34 4.94
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