Mortgage rates rose last week, closing in on the 3% mark and with it, mortgage applications increased 0.5%, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending February 26, 2021.
With the spring homebuying season right around the corner, the market is primed for a strong run, as demand is outweighing supply nationwide and bidding wars have intensified for the low available inventory.
The MBA reported that the Market Composite Index, a measure of mortgage loan application volume, increased 0.5% on a seasonally-adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2% compared to the previous week.
"The housing market is entering the busy spring buying season with strong demand,” said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. “Purchase applications increased, with a rise in government applications—likely first-time buyers—pulling down the average loan size for the first time in six weeks."
Homeowners are still capitalizing on low rates, as the refinance share of mortgage activity decreased to 67.5% of total applications from 68.5% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 2.9% of total applications.
On the government side, the MBA reported that the FHA share of total applications increased to 12.1% from 11.2% the week prior. The VA share of total applications increased to 12.3% from 11.9% the week prior. The USDA share of total applications increased to 0.4% from 0.3% the week prior.
"The overall share of refinances declined for the fourth consecutive week, and conventional refinance applications fell more than 2% to the lowest level in four months,” said Kan. “Government refinance applications historically lag the more rate-sensitive movements of conventional applications, and that was true last week, as both FHA and VA refinancing volumes increased."
MBA’s Weekly Mortgage Applications Survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts.