A home for sale is seen in Santa Monica, California.
Lucy Nicholson | Reuters
The combination of a holiday week and a stagnant mortgage rate environment kept borrowers away from their lenders last week. Mortgage application volume decreased 9.2% from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
The week's results also include an adjustment for the Thanksgiving holiday.
Refinance weakness caused the overall drop. Those applications fell 16% for the week but were 61% higher than a year ago. Annual comparisons in this report and last week's report are skewed because Thanksgiving fell one week earlier last year. The weekly drop was likely due to ennui over interest rates. Borrowers usually respond to big changes in rates, and there was none last week.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) remained unchanged at 3.97%, with points increasing to 0.32 from 0.30 (including the origination fee) for loans with a 20% down payment.
"U.S. Treasury rates stayed flat last week, as uncertainty surrounding the U.K. elections offset positive domestic news on consumer spending," said Joel Kan, MBA's associate vice president of economic and industry forecasting.
Mortgage applications to purchase a home increased 1% for the week and were 24% lower annually. That annual comparison, again, means nothing due to the difference in the timing of Thanksgiving this year. This is not exactly the busy season for buying, but home shoppers are benefiting from low mortgage rates, and pent-up demand from last spring continues to fuel the fall market.
"The purchase market overall looks healthy as we enter the home stretch of 2019," Kan said. "The seasonally adjusted purchase index was at its highest level since July, as a combination of wage gains, slower home-price appreciation, and slightly easing inventory conditions [for new construction] continue to support increased activity."
The refinance share of mortgage activity decreased to 59% of total applications from 62% the previous week. The adjustable-rate mortgage share of activity remained unchanged at 4.8% of total applications.
Mortgage rates started this week higher but fell abruptly Tuesday after President Donald Trump suggested a trade deal with China was no longer imminent.
"In the wee hours of the morning, Trump was quoted as saying it might not make sense to finalize the trade deal until after the November 2020 election. Stock prices and bond yields dropped quickly before leveling off as the domestic session began," wrote Matthew Graham, chief operating officer of Mortgage News Daily. "Equities futures resumed the selling spree as soon as US traders were firing on all cylinders and bond yields weren't far behind. Additional Trump comments (that alluded to the risk of European trade wars) kept the good times rolling for rates."
If rates stay low this week, refinance volume will likely recover and move higher again.