Mortgage application volume dropped for the second consecutive week, with rates falling to a new record low, but overall activity still remains well ahead of one year ago, the Mortgage Bankers Association said.
The MBA's Weekly Mortgage Applications Survey for the week ending July 31 reported a 5.1% drop
But even as the 30-year conforming fixed-rate mortgage reached a new low point, the refinance index fell by 7% from the previous week and the purchase index (both on a seasonally adjusted and unadjusted basis) fell by 2%.
On a year-over-year basis, the refi index was up 84% and the unadjusted purchase index was up 22%; it is the 11th consecutive week that the purchase index was higher than it was in 2019.
The refinance share of mortgage activity fell to 63.9% of total applications from 65.1% the previous week.
"The MBA's forecast calls for rates to remain at these low levels, which will continue to spur strong refinance activity and offer homeowners relief in the form of lower monthly mortgage payments during these uncertain economic times," said Joel Kan, associate vice president of economic and industry forecasting at the group.
"Purchase loan balances continued to climb, which is perhaps a sign that the still-weak job market and tighter credit for government loans are constraining some first-time homebuyers," he added.
The organization's July forecast states that mortgage rates will average 3.2% in the third quarter and 3.3% in the fourth quarter. Purchase volume is predicted to be $380 billion in the current period and $315 billion for the last three months of the year.
For the full year, the MBA is forecasting $1.5 trillion of refinancings and $1.3 trillion of purchases. This is a little more conservative than
Fannie Mae is also predicting rates at 2.9% in the fourth quarter and even lower next year. The MBA on the other hand, expects slightly higher rates in 2021.
Applications for adjustable-rate mortgages declined to 3.1% for total volume from 3.2% last week.
Meanwhile the share of applications for the three government mortgage programs were all unchanged from the previous week: Federal Housing Administration at 9.6%; Veterans Affairs at 11.2%; and U.S. Department of Agriculture/Rural Housing Service at 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) dropped to 3.14% from 3.2% one week prior. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate declined 1 basis point to 3.51%.
The average contract interest rate for 30-year fixed-rate FHA-insured mortgages was unchanged at 3.27%. For 15-year fixed-rate mortgages, the average fell 3 basis points to 2.73%. The average contract interest rate for 5/1 ARMs increased to 3.09% from 3.08%.
