Mortgage application activity declined 6.5% in the week ending Feb. 25 with both refinancing and purchase activity lower — despite a decline in mortgage rates.
According to the Mortgage Bankers Association, the average contract interest rate for 30-year fixed rate mortgages dropped 16 basis points to 4.84% for 80% LTV loans. This was the third straight week of declines.
Even so, the Refinance Index fell 6.5% to ~2037. As a percent of total applications, refinancing share was 64.9%, down from 65.7% in the previous week. Meanwhile, the Purchase Index was down 6.1% to ~173.
For the month of February, the Refinance Index, on average, was 8.4% lower than January's average as mortgage rates averaged 19 basis points higher to 4.95%.
As a result, prepayments will remain muted in the months ahead. Currently, speeds in March (reported in April) are projected to be flat to slightly higher, primarily because the day count jumps to 23, while April speeds are expected to be 5% to 10% slower, with day count dropping to 20.