Loan Applications Rise Even As Rates Hit Highest Point Since 2009

Mortgage loan application volume rose by 2% last week, the Mortgage Bankers Association’s (MBA) weekly survey shows.

The adjusted Market Composite Index, a measure of mortgage loan application volume, rose by 2%. The adjusted purchase index increased by 5%, while the unadjusted purchase index was up by 5% and was 8% lower YOY.

The refinance index fell 2% and was down 72% YOY. Refinances made up 32.4% of total applications, down from 33.9%. 

ARM activity accounted for 10.8% of total applications, up from 9.3%.

“The increase in mortgage applications last week was driven by a strong gain in application activity for conventional and government purchase loans, even as mortgage rates rose to their highest level – 5.53%– since 2009. Despite a slow start to this year’s spring homebuying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

“More borrowers continue to utilize ARMs to combat higher rates. The share of ARMs increased to 11% of overall loans and to 19 percent by dollar volume.”

Adjustable rate mortgages are growing in popularity as homebuyers see mortgage rates climbing quickly. Some buyers trying to make the best of the hot housing market prefer to risk higher rates down the line in order to get into a home at an affordable price now.

“ARMs are definitely becoming more and more popular,” Trey Reed, a loan officer for Intercoastal Mortgage in Fairfax, Virginia, told NBC. “In the last 90 days, we’re seeing probably a quarter to a third of all loans are ARMs. They’re an option that’s getting considered more than half the time.” 

The FHA share of total applications fell to 10.5% from 11.1%. The VA share of total applications rose to 10.5% from 10.3%, while the USDA share of total applications rose from 0.4% to 0.5%, where it typically hovers.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased from 5.36% to 5.53%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose from 4.92% to 5.08%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA rose from 5.27% to 5.37%