The transition from July into August brought a new flurry of refinancing activity, according to data from the Mortgage Bankers Association (MBA) for the week ending Aug. 2.
The Market Composite Index increased 5.3 percent on a seasonally-adjusted basis from one week earlier, while the unadjusted index rose by an even five percent. Both the seasonally adjusted and unadjusted Purchase Index decreased two percent from one week earlier, although the latter was also seven percent higher than the same week one year ago. However, the Refinance Index increased 12 percent from the previous week and was a whopping 116 percent higher than the same week one year ago. The refinance share of mortgage activity increased to 53.9 percent of total applications from 50.5 percent the previous week.
Among the federal programs, the FHA share of total applications decreased to 11.0 percent from 11.3 percent the week prior, while the VA share of total applications increased to 12.8 percent from 12.6 percent and the USDA share of total applications remained unchanged at 0.6 percent.
“The Federal Reserve cut rates as expected last week, but the bigger influence on the financial markets was the beginning of a trade war with China,” said Mike Fratantoni, MBA senior vice president and chief economist. “The result was a sharp drop in mortgage rates, which will likely draw many refinance borrowers into the market in the coming weeks. The 30-year fixed rate mortgage fell to its lowest level since November 2016, and the drop resulted in an almost 12 percent increase in refinance application volume, bringing the index to a reading over 2,000–its highest over the same time period. We fully expect that refinance volume will jump even higher this week given the further drop in rates.”