Brexit Drives Mortgage Application Activity Surge so says the MBA

Mortgage applications increased 14.2% from one week earlier as rates dropped in reaction to the Brexit vote, according to data from the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending July 1 found that the refinance index increased 21% from the previous week to the highest level since January 2015. Meanwhile, the market shares of refi apps increased to 61.6%, the highest level since February 2016, from 58.1%.

At the same time, the seasonally adjusted purchase index increased 4% from one week earlier. On an unadjusted basis, purchase applications are up 23% over the same week in 2015.

"Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over three years," said Mike Fratantoni, the MBA's chief economist.

The adjustable-rate mortgage shares of applications decreased to 5.6% of total applications from 5.9%, while the Federal Housing Administration share decreased to 9.5% from 10.6%, the Veterans Affairs share increased to 12.8% from 12.2% and the USDA share decreased one basis point to 0.6%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since May 2013, 3.66%, from 3.75%.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,000) decreased to its lowest level since January 2011, 3.67%, from 3.74%.

The average contract interest rate for 30-year mortgages insured by the FHA decreased to its lowest level since May 2013, 3.56%, from 3.61%, while for 15-year fixed-rate mortgages, the average decreased to its lowest level since May 2013, 2.96%, from 3.02%.

The average contract interest rate for 5/1 ARMs decreased to its lowest level since April 2015, 2.85%, from 2.88%.