Mortgage applications jumped last week as rates retreated, sending buyers running to complete deals.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – increased by 2.8%.
Adjusted purchase applications rose by 3%, while the unadjusted index slipped 0.3% from the week before and was 12% lower YOY.
Rates held steady at 7.61% after seeing their largest single-week drop in more than a year the week prior, down 30 bps in three weeks.
But while buyers mid-sale benefitted from the cooldown, rates have not dropped enough to entice many off the sidelines.
“Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Affordability remains at record lows, keeping both buyers and sellers stuck in their current homes. Heavy competition for attractive listings forced home prices up for a seventh straight month in October, boxing lower-income and first-time buyers out.
Sellers are handing out concessions to keep buyers from changing their minds at the last second.
“House hunters are pickier than ever before. It’s really expensive to buy a home today, so they want to make sure they find the right one. Buyers have become increasingly likely to terminate a deal if they don’t get the concessions they want,” Seattle Redfin agent David Palmer said.
Refinances rose 2% and accounted for 31.9% of total applications. There remains a small market for them as locked-in homeowners cling to sub-5% rates. In the past decade, they averaged 58% of total activity.
ARMs fell to 8.8% of total applications, coming down from a brief boost while rates neared 8%.
The FHA share of total applications fell to 14.4%, with an average interest rate of 7.36%.
The VA’s share rose to 11.2% from 10.5%, while the USDA’s share remained unchanged at 0.5%.
Meanwhile, the jumbo rate rose from 7.58% to 7.65%. Jumbo activity increased to its highest level in 14 months in October, bringing overall credit availability up with it.
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