Mortgage Applications

The Mortgage Bankers Association released its weekly applications report this morning which showed a continued decline in purchase applications. This trend reflects the weight of higher mortgage rates, weather and new regulatory changes.

• Seasonally adjusted applications to purchase homes fell 3.5% in the week of February 21st compared to the prior week. The purchase index is roughly 14.9% lower than the same time in 2013. This week’s moderation follows last week’s 6.3% slide and is the fourth consecutive decline in the total purchase index.

• The average rate for a 30-year fixed rate mortgage as reported by the Mortgage Bankers Association rose three basis points from the prior week to 4.53%, and has eased nearly 19 basis points since the beginning of the year.
• New purchase applications for conventional mortgages eased 3.8% following a decline of 7.3% in the prior week, while applications for government financing fell 3.2% following a drop of 3.9% in the prior week. Both FHA and conventional lending have slumped in recent weeks.
• Purchase applications surged in the week of January 10th ahead of the CFPB’s introduction of the new QM rule. They subsequently eased and have fallen on a seasonally adjusted basis for the past six weeks consecutively in the conventional space and the last four weeks for FHA.
• Mortgage applications have been volatile since the implementation of the new qualified mortgage rule six weeks ago. Since then mortgage rates have eased, helping to buttress the secular decline in applications. The qualified mortgage rule is likely to have an impact on lending in the near term as lenders adjust to the new rules, but all things equal consumers are still likely to resume purchases with a delay. Strong weather patterns have also had an impact, but the sharp rise in mortgage rates and prices compared to last year as well as weak job and income growth have all played an important role in the sustained decline. Reduced affordability will likely hold back applications and weigh on price growth in the near term until employment and incomes enable consumers to adjust.