Mortgage applications spiked last week as both purchase and refinance loans saw a boost.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – jumped by 5.4%, wiping out the week prior’s 0.8% decrease.
Adjusted purchase applications rose by 2%, while the unadjusted index increased by 12% from the week before and was 26% lower YOY. The results included an adjustment for the Labor Day holiday.
Refinances also improved, rising 13% and making up 31.6% of total applications. In the past decade, refis averaged 58% of total activity.
Meanwhile, the average interest rate for a 30-year fixed loan increased to 7.31%, its highest level in a month.
MBA VP and Deputy Chief Economist Joel Kan noted that despite the improvement, purchase conditions remain “challenging” thanks to low inventory and the ongoing affordability crisis.
“The average loan size on a purchase application was $416,800, the highest level in six weeks. Home prices in many markets have been supported by low inventory and resilient housing demand for available homes,” Kan said.
Starter homes in particular have seen huge price gains as both first-time and repeat homebuyers hunt for deals. Many would-be “move up” buyers– those who, in better financial conditions, would typically look for a larger, more expensive home– are filtering down into lower price tiers as rates limit their spending power.
In the same vein, vacation home demand is near a seven-year low, with rate locks for second homes down nearly 50% from pre-pandemic levels.
First American chief economist Mark Fleming predicts that market forces will balance some when rates settle.
“Mortgage rate stability, even if the stabilization occurs at a higher level, is the key to a housing recovery,” he wrote.
The FHA share of total applications remained unchanged at 14.2%.
ARM applications fell 0.3% to 7.2% of the total. The VA’s share was down 0.3% to 11%, while the USDA’s share stayed put at 0.4%.
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