Mortgage application volume slows despite low-interest rate environment

Despite the recent decline in mortgage rates, the Mortgage Bankers Association indicates application volume retreated by 1.5% from the previous two weeks.

This means on an unadjusted basis, the index fell by 1.5% for the week ending on Jan. 3, 2020.
The MBA indicates this week’s results include adjustments to account for the holidays.

“Mortgage rates dropped last week, as investors sought safety in U.S. Treasury securities as a result of the events in the Middle East, with the 30-year fixed mortgage rate declining to its lowest level (3.91%) since early October,” said Mike Fratantoni, MBA senior vice president and chief economist. “Despite lower rates, refinance volume decreased these last two weeks, and we expect that it will slowly rail off in the first half of 2020 as long as mortgage rates remain in this same narrow range.”

According to the organization, the Refinance Index fell by 8% from two weeks ago, while the seasonally adjusted Purchase Index rose 5% and the unadjusted Purchase Index fell by 14%.

“The end of the year is the slowest time for home sales, so it is not at all surprising that activity was light,” Fratantoni said. “However, after a seasonal adjustment, purchase application volume was up relative to the pre-holiday period and started off 2020 ahead of last year’s pace.”

Fratantoni said the nation’s strong job market will continue to support purchase activity throughout the new year, and the recent uptick in housing construction is likely to provide more housing for prospective buyers.