Mortgage rates have declined further recently, but home loan applications have actually fallen. In the past two weeks, the Market Composite Index fell by 1.5 percent for the week of Jan. 3, 2020, according to the Mortgage Bankers Association (MBA). The MBA acknowledges that the results for this week are adjusted to consider the holidays.
Mike Fratantoni, MBA’s chief economist and senior vice president, said: “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 percent) since early October. 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.”
In addition to a decline in new mortgage applications, the Refinance Index also fell from two weeks ago, down by 8 percent. Meanwhile, the adjusted Purchase Index was 5 percent higher, and the unadjusted Purchase Index was down by 14 percent.
Fratantoni acknowledged that seasonally, the end of the year is typically the slowest pace for mortgage sales. He said when you consider adjusting for the season, applications for home purchases were up by volume in relation to the pre-holiday period. Also, the 2020 pace thus far is ahead of last year’s.
Frantantoni expects that a robust job market will further support home purchases throughout the year. Furthermore, housing construction is also seeing an uptick and is likely to attract prospective buyers.