The Federal Housing Administration’s reduction in annual mortgage insurance fees to 0.85 percent of the loan balance from 1.35 percent, which took effect Jan. 25, has had a big impact on refinancing applications.
The cut in insurance premiums can save homeowners, and especially typical first-time homebuyers, about $900 in their annual mortgage payment, according to the FHA.
The Mortgage Bankers Association says that since Jan. 25 FHA refinance applications have soared.
“Following several weeks of already elevated refinance activity due to falling interest rates, FHA refinance applications increased 76.5 percent in response to a reduction in annual mortgage insurance premiums which took effect January 26,” said Lynn Fisher, MBA’s Vice President of Research and Economics.
Conventional refinance volume was up only 0.5 percent last week, compared to the previous week. While Veterans’ Administration refinance volume was down 24.3 percent. FHA purchase applications were also up 12.4 percent over the week prior, despite a decrease in purchase applications in the rest of the market.
The FHA share of total mortgage applications increased to 13.1 percent this week, from 9.1 percent last week.
The overall refinance share of mortgage activity decreased to 71 percent of total applications from 72 percent the previous week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.69 percent from 3.71 percent last week for 80 percent loan-to-value loans.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.79 percent, the lowest level since May 2013, from 3.83 percent, for 80 percent loan-to-value ratio (LTV) loans.