Mortgage applications fall as fears of second wave rise

Uncertainty over rising Covid infections, wait-and-see for next round of government relief holds buyers back

National /
Jul.July 29, 2020 09:00 AM
Fears over a second wave of coronavirus infections and the wait-and-see for the next round of government relief has led U.S. homebuyers to hit pause. (iStock)

Fears over a second wave of coronavirus infections and the wait-and-see for the next round of government relief has led U.S. homebuyers to hit pause. (iStock)

Homebuyers are pumping the breaks as mortgage rates, Covid infections and uncertainty rises.

An index tracking the weekly volume of applications for loans to buy homes fell 2 percent, seasonally adjusted, in the fourth week of July.

The Mortgage Bankers Association’s metric, known as the purchase index, has been up and down throughout July. Until the third week of the month, annual volume compared to the same weeks in 2019 was up for nine consecutive weeks.

Mike Fratantoni, MBA’s chief economist, said the decline in applications indicates that “prospective first-time buyers are being impacted more by the rising economic stress caused by the resurgence in Covid-19 cases.”

He added that the “uncertainty on how the next round of government support will take shape” is also a factor.

The average size of purchase loans increased last week to $364,600 from $362,500 the week before.

Refinancing activity, tracked by MBA’s refinance index, was flat last week. The seasonally adjusted index dropped 0.4 percent but was up 121 percent year over year.

Fratantoni attributed the flat refinance index to the Federal Housing Administration’s mortgage rates rising last week. FHA’s 30-year fixed mortgage rate increased to 3.27 percent from 3.13 percent. The result was an 18 percent drop in FHA refinances, according to Fratantoni.

The average 30-year mortgage rate, based on MBA’s survey, was 3.20 percent last week, unchanged from the week before. Jumbo rates increased by 1 basis point to 3.52 percent.

A week earlier, on July 16, Freddie Mac announced the average rate for 30-year mortgage had hit a 50-year low of 2.98 percent.

Applications for FHA loans represented 9.6 percent of the total mortgage market surveyed by MBA last week. In the third week of July, FHA loans represented 10.8 percent of the total applications.

Applications to refinance made up 65 percent of the total MBA tracks in its survey, which has been running since 1990 and considers 75 percent of the residential mortgage market. MBA’s overall index measuring all home-loan applications fell by 0.8 percent last week.

Write to Erin Hudson at [email protected]


Related Articles

arrow_forward_ios
Housing, Collapse
Housing starts collapse under inflation, high rates
Housing starts collapse under inflation, high rates
Blend Labs ceo Nima Ghamsari (Illustration by Kevin Cifuentes for The Real Deal with Getty Images, Blend)
Digital mortgage firm Blend loses $478M, sheds more of workforce
Digital mortgage firm Blend loses $478M, sheds more of workforce
(Illustration by Kevin Rebong for The Real Deal with Getty)
Mortgage demand drops to turn-of-the-century levels
Mortgage demand drops to turn-of-the-century levels
Wells Fargo CEO Charles Scharf (Getty Images)
Wells Fargo backing off mortgage market
Wells Fargo backing off mortgage market
(Illustration by The Real Deal with Getty)
Housing affordability hits 33-year low
Housing affordability hits 33-year low
Homeward founder Tim Heyl (Homeward, Getty Images)
Power buyer Homeward lays off 20% of staff
Power buyer Homeward lays off 20% of staff
Hilton Head (Illustration by The Real Deal with Getty Images)
The new normal: $1M price tags in Hilton Head
The new normal: $1M price tags in Hilton Head
A photo illustration of restaurant and construction workers (Getty Images)
Hiring by hotels, bars and restaurants behind big July jobs gain
Hiring by hotels, bars and restaurants behind big July jobs gain
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...