Mortgage Apps: Decline Led By Another Drop in Refis

Bottom Line: After a small bounce in the first week of May, mortgage applications fell again last week. Down over 4%, the decline was led by refinancing applications, which remain near record lows, despite a nearly 25bp decline in mortgage rates since March. While purchase applications fell in the latest week, the trend there remains steadily to the upside. Overall, the purchase applications suggest continued strength in housing activity, while the refinance application suggests prepayments due to refinancing of existing mortgages should remain low. The MBA Mortgage Applications Index FELL by 4.1% during the week ended May 12 to 398.8, slightly below its 13 week average of 401.6 and 17.9% BELOW its year ago level. The Purchase Index FELL by 2.7% to 243.6, modestly above its 13 week average of 238.3 and 8.7% ABOVE its year ago level. The level of purchase activity had stayed quite low after the crisis until 2015 when it started to rise. That trend lost momentum in mid-2016 but has now started to rise again, despite higher mortgage rates. The Refinance Index FELL by 5.7% to 1,269. With this decline, refinancing activity is modestly below its 13 week average of 1,314 and 36.5% BELOW its year ago level. Contract Mortgage Rates were MIXED with the 30-year fixed rate was unchanged at 4.23% and with the 15-year fixed rate increasing by 1 bp to 3.51%.