Applications Up Despite Near-7% Rates

Mortgage applications rose for a second week despite rates trending back towards 7% as inventory increases.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — rose by 1.7%, adding to the week prior’s 0.5% increase.

This is the second increase after six straight weeks of declines despite rates marching upward for the past four weeks.

The 30-year fixed rate hit 6.90%, its highest point since July.

Adjusted purchase applications were up by 2% on the week, while the unadjusted index was down 3% and 1% lower year-over-year.

First-time buyers took advantage of more affordable FHA financing options, accounting for a high share of applications. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA was 6.68%.

“The pickup in purchase applications was driven by conventional and FHA loans, with FHA purchase applications seeing a 7% increase,” Joel Kan, MBA’s Vice President and Deputy Chief Economist, said. 

“For-sale inventory has loosened in some markets and some potential buyers have been able to take advantage of increasing supply and lower FHA rates, which were down slightly in comparison to the conforming 30-year fixed rate.”

More stock is tempting some sidelined buyers back despite economic uncertainty and a high-rate environment. Purchase applications were up more than 8% YOY in October despite the election and increasing purchase costs.

Projects that homebuilders started in the last year are hitting the market, offering an “attractive alternative” to scarce existing homes.

Refinance activity also improved slightly, accounting for 41% of total applications. A 10% jump in VA applications drove the increase.