Mortgage application activity dropped 5.6% in the week ending April 22 despite a decline in mortgage rates, according to the Mortgage Bankers Association (MBA). However, the number was not adjusted for the Good Friday holiday.
The decline was mostly a result of a 13.5% decrease in the Purchase Index to 182. "Purchase applications fell last week, driven primarily by a sharp decrease in government purchase applications as new, higher [Federal Housing Administration (FHA)] premiums went into effect," said Michael Fratantoni, MBA vice president of research and economics. “This decrease reverses a 20% increase in government purchase applications over a four-week period, which was likely driven by borrowers attempting to beat this deadline.”
Meanwhile, the Refinance Index changed slightly at ~1964 compared with ~1976 in the previous report. It would have been modestly higher if the data were adjusted for the holiday, as the 30-year fixed-rate mortgage rate slipped three basis points to 4.80% with points declining to 1.01% from 1.06% for an 80% LTV loan. As a percent of total applications, the refinance share was higher to 61.6% from 58.5%.
Still, the level of the Refinance Index is unimpressive considering mortgage rate levels. This is because many borrowers are outside of the refinance window or remain unable to refinance because of weak home values and tight credit conditions.
The May and June prepayment reports are when recent refinancing activity will filter through. Conventional speeds are expected to increase just 2% to 3% on average in May, after an expected slowing in April. They are also projected to rise 3% to 4% in June primarily as the number of collection days increase.
Meanwhile, GNMAs are expected to further slowdown in May because of the 25 basis point increase in FHA's mortgage insurance premium effective April 18, and to be slightly higher in June.