The Mortgage Bankers Association (MBA) announced Wednesday that the Market Composite Index, a measure of mortgage loan application volume, reached its highest level last week since May 2013.
The gain in the Market Composite Index for the week ending January 31 was 5 percent greater on a seasonally adjusted basis than the previous week, which had been adjusted to account for the shortened week due to Martin Luther King, Jr. Day. Had the results of that week not been adjusted for the holiday, the index last week would have risen 20 percent compared to the previous week.
The Refinance Index also reached a high since June 2013 — the index jumped by 15 percent and was 183 percent higher than the same week last year.
Some indexes did fall, however. The seasonally adjusted Purchase Index decreased by 10 percent from one week earlier, while the unadjusted Purchase Index managed to increase 8 percent from the week before and increase 11 percent from the same week in 2019.
Fears about the coronavirus pandemic affecting the Chinese economy also came into play in last week’s numbers.
“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus,” Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, said in a statement. “This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks to 3.71 percent, its lowest level since October 2016.”
With mortgage rates lowered, homeowners responded by taking the opportunity to refinance.
“Refinance activity jumped as a result, with an increase in the number of applications and a spike in the average loan amount, as homeowners with jumbo loans reacted more resoundingly to lower rates,” Kan added.
Prospective homebuyers did not appear to take advantage of the dip in mortgage rates, however, and Kan noted that this was “likely because of suppressed supply levels. Purchase applications took a step back, but still remained 11 percent higher than a year ago.”
Although anxiety over the coronavirus significantly affecting financial markets led to these mortgage rate declines, Tuesday’s upturn in the stock market, and the resulting slight increase in mortgage rates, may be a harbinger of change.
“The bigger issue is merely the risk that [Tuesday] marks some sort of turning point in the bigger picture. It’s too soon to know if that’s what this is, but it’s definitely the first obvious candidate since the coronavirus rate-drop began,” Matthew Graham, chief operating officer of Mortgage News Daily, told CNBC.
