Mortgage loan application volume rose 1.2% last week when rates took a downward turn, the Mortgage Bankers Association’s weekly survey shows.
The adjusted Market Composite Index, a measure of mortgage loan application volume, decreased by 1.2%. Both the adjusted and unadjusted purchase indices rose 1%. The unadjusted index was 16% lower YOY.
The refinance index rose by 2% and made up 30.8% of total applications, down 82% from the same time last year.
ARM activity dropped from 9.1% to 8.4% of total applications.
“Mortgage rates declined last week following another announcement of tighter monetary policy from the Federal Reserve, with the likelihood of more rate hikes to come. Treasury yields dropped as a result, as investors continue to expect a weaker macroeconomic environment in the coming months,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Kan noted that the 30-year fixed rate had its largest weekly drop since 2020, down 31 basis points from 5.74% to 5.43%.
“The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed. Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity,” he said.
There is hope for buyers who have struggled to find an affordable home in the last two years. Inventory is beginning to rebound, putting downward pressure on prices.
Home price growth saw the largest single-month slowdown on record since at least the 1970s in June, coinciding with a huge increase in inventory.
But it’s a slow-going process. Home price growth would need to fall at this pace for six consecutive months before annual price appreciation returns to 5%.
“Given it takes about five months for interest rate impacts to be fully reflected in traditional home price indexes we’re likely not yet seeing the full effect of recent rate spikes, with the potential for even stronger slowing in coming months,” said Black Knight Data & Analytics President Ben Graboske.
The FHA share of total applications fell from 12.1% to 11.9%. The VA share rose to 10.8% from 10.6% of total applications, while the USDA share remained unchanged at 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased from 5.74% to 5.43%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell from 5.32% to 5.06%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA dropped from 5.54% to 5.39%, and for 5/1 ARMs decreased from 4.67% to 4.55%.