The Mortgage Bankers Association’s (MBA) latest Weekly Application shows a slight decrease in applications for the week ending July 24, 2020. The Market Composite Index decreased by 0.8% from the previous week on a seasonally adjusted basis. Refinancing activity, one of its determinants, decreased by 0.4% from the previous week, while purchasing activity decreased slightly more by 1.5%.
The MBA’s 30-year fixed-rate mortgage rate hovered near the historical low reached two weeks ago but remained unchanged from the previous week at 3.2% The MBA states that refinances in the conventional loan category continued to increase slightly, but that those in government-backed mortgages, namely FHA loans, experienced sizable drops due to rate increases. Purchase application volumes dropped across all categories of government-backed loans (FHA, VA, and USDA). The MBA attributes this homeowner behavior to uncertainty owing to the resurgence in COVID-19 cases. However, purchase applications remain 21% higher than a year ago on an unadjusted basis.
As was the case in the prior week, activity in adjustable-rate mortgages (ARMs) showed continued growth, not only showing a stronger percentage gain than the prior week had, but also increasing in terms of the share of activity to 3.5% of total applications.
Interestingly, despite FHA-backed mortgage activity’s decreased momentum in the past couple of weeks, the share of FHA-backed new home sales reached an 8-year high in the first quarter of this year. The MBA states that as average loan size continues to increase, it will put economic stress on first-time homebuyers, adding to market challenges resulting from the pandemic.