Mortgage applications had a massive gain during the week ending Aug. 9, with the market composite index from the Mortgage Bankers Association (MBA) increasing 21.7% on a seasonally adjusted basis from the previous week.
Unadjusted figures show the index grew 20% compared to the prior week. The unusually large gain was propelled by a surging refinance market, with the component refinance index growing 37% from a week earlier. The refinance index ended the week 196% higher than the same week in 2018 and is now at its highest level since July 2016. And the component refi index for government loans is now at its highest level since May 2013, fueled by a 25% jump in U.S. Department of Veterans Affairs (VA) refinance applications.
“The 2019 refinance wave continued, as homeowners last week responded to extraordinarily low mortgage rates,” said Joel Kan, the MBA’s associate vice president of economic and industry forecasting. “Fears of an escalating trade war, combined with economic and geopolitical concerns, once again pulled U.S. Treasury rates lower. The 30-year fixed mortgage rate decreased eight basis points to 3.93% — the lowest level since November 2016 — and has now dropped more than 80 basis points this year.”
In only the past two weeks, Kan added, rates have fallen 15 basis points, with the refi index reacting by jumping more than 50%.
The refinance share of mortgage activity has now grown to 61.4% of all applications, up from 53.9% during the previous week.
Purchase applications also have benefited from the low-rate environment, with the seasonally adjusted purchase index up 2% week over week. On an unadjusted basis, the purchase index grew 1% from the prior week and was up 12% annually.
Last week’s whopping gains continued a recent run of good news for the mortgage industry. Earlier in the week, the Federal Reserve Bank of New York’s Center for Microeconomic Data reported a big second-quarter rebound in originations. Quarterly loan volume grew to $474 billion — the largest dollar amount since third-quarter 2017. That was a $130 billion increase over a meager first quarter of this year, which yielded the mortgage industry’s worst quarterly volume in four years.
Other tidbits from the MBA’s report included the adjustable-rate mortgage share of activity increasing to 6% of total applications. The share of Federal Housing Administration loans, meanwhile, retreated to 9.5%, down from 11% week over week. The VA loan share ebbed from 12.8% to 12.2%, while the U.S. Department of Agriculture (USDA) loan share decreased from 0.6% to 0.5%.