Applications for residential loans turned sharply higher this past week thanks to Brexit, and ongoing falling rates could mean further improvement ahead.
The Market Composite Index climbed a seasonally adjusted 14 percent in the week ended on July 1 compared to the report issued seven days earlier.
Without any seasonal adjustments, the index — a measure of mortgage loan application volume — was still down 14 percent from the week ended June 24.
The Mortgage Bankers Association includes the index in its
Weekly Mortgage Applications Survey, which it says covers more than three-quarters of all U.S. retail residential loan applications.
The week-over-week gain was even more impressive given that activity typically tends to slow heading into a holiday weekend.
Applications for refinances led the increase, accelerating 21 percent from the last report on a seasonally adjusted basis. Refinance business has not been this strong since January 2015.
Refinance share was 61.6 percent, wider than 58.1 percent a week earlier and 48.0 percent a year earlier.
“Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over 3 years,” MBA Chief Economist Mike Fratantoni said in the report. “In response, refinance application volume jumped almost 21 percent last week to its highest level since January 2015.”
Rates have retreated even further since MBA conducted the survey, with the benchmark 10-year Treasury note yield sinking to
1.37 percent Tuesday — the lowest level on record.
Even loan applications for purchase financing rose — by 4 percent from the previous report. Foregoing seasonal adjustments, purchase activity was up 4 percent from a week earlier and 23 percent from a year earlier.
Applications for mortgages insured by the Federal Housing Administration made up 9.5 percent of total volume. FHA share thinned from 10.6 percent seven days earlier and slid from 13.7 percent twelve months earlier.
Department of Veterans Affairs applications accounted for 12.8 percent of overall activity, more than the 12.2 percent VA share a week prior and
10.8 percent a year prior.
Adjustable-rate mortgage applications accounted for 5.6 percent of total application volume. ARM share thinned from
5.9 percent in MBA’s prior report and 7.1 percent in the year-prior report.
Jumbo interest rates
were a basis point higher than conforming rates in the latest report, swinging from a negative 1-basis-point jumbo-conforming spread one week earlier and a negative 5-basis-point spread one year earlier.
