Mortgage applications decreased 2.6% from one week earlier, as tighter underwriting drove the refinance index to its lowest level since March, according to the Mortgage Bankers Association.
The MBA's Weekly Mortgage Applications Survey for the week ending May 15 found that the refinance index decreased 6% from the previous week although it was 160% higher than the same week one year ago. The refinance share of mortgage activity decreased to 64.3% of total applications from 67% the previous week.
"Despite mortgage rates remaining close to record-lows, refinance activity slid to its lowest level in over a month," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "The average loan amount for refinances fell to its lowest level since January — potentially a sign that part of the drop was attributable to a retreat in cash-out refinance lending as credit conditions tighten."
"We still expect a strong pace of refinancing for the remainder of the year because of low mortgage rates. With many homeowners still facing economic and employment uncertainty, these refinance opportunities will allow them to save money on their monthly payments, which can then be used to help other areas of their budgets."
But purchase application activity continued its revival, rising for the fifth consecutive week, by 6% on a seasonally adjusted basis and 6% unadjusted compared with the previous week.
"Purchase activity — which was 35% below year-ago levels six weeks ago — increased across all loan types and was only 1.5% lower than last year," Kan said. "Government purchase applications, which include FHA, VA and USDA loans, are now 5% higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months. As states gradually reopen and both home buyer and seller activity increases, we will be closely watching to see if these positive trends continue, or if they reflect shorter-term, pent-up demand."
Adjustable-rate mortgage activity increased to 3.2% from 2.9% of total applications, while the share of Federal Housing Administration-insured loan applications remained unchanged from 11.5% the week prior.
The share of applications for Veterans Affairs-guaranteed loans decreased to 13.4% from 13.7% and the U.S. Department of Agriculture/Rural Development share increased to 0.7% from 0.6% the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased 2 basis points to 3.41%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate decreased 3 basis points to 3.66%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased 9 basis points to 3.46%. For 15-year fixed-rate mortgages, the average decreased 4 basis points to 2.88%. The average contract interest rate for 5/1 ARMs decreased to 3.19% from 3.26%.