Mortgage applications righted themselves last week after a brief dip as buyers took advantage of cooling rates.
The Mortgage Bankers Association’s weekly survey says the adjusted Market Composite Index – a measure of mortgage loan application volume – increased by 5.3%, outstripping last week’s 4.1% decline.
Adjusted purchase applications rose by 8%, while the unadjusted index was up 9% from the week before and 31% lower YOY.
The average interest rate for 30-year fixed loans fell from 6.40% to 6.30%. This is the lowest level in two months. MBA’s SVP and Chief Economist Mike Fratantoni attributed this to slowing job market data released last week. Slowing employment leads to less demand for housing, typically pushing rates down, and vice versa.
“Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing,” Fratantoni said.
Declining rates have a huge impact on what homebuyers can afford. The same buyer can now afford 84 square feet more than they could when rates were above 7%, and the typical value of a home they can afford is up by around $60,000.
Refinances saw a slight improvement, up just 0.1% from the week prior. They remain 57% lower than the same time last year, however, comprising only 27% of total applications.
In the past decade, refis averaged 58% of total activity.
“Refinance application volume was a mixed bag with total volume essentially flat, conventional volume down for the week, but VA refinance volume increasing,” Fratantoni added.
Rates are still two percentage points higher than at the same time last year, making refinancing unattractive for many borrowers who locked in rates before increases.
Other key findings include:
-Jumbo rates dropped from 6.36% to 6.26%.
-The FHA share of total applications rose from 12% to 12.3% with an average interest rate of 6.29%.
-The VA share increased to 12.8% from 11%, and the USDA share fell to 0.5% from 0.6%.
–ARMs accounted for 6% of applications, and the rates for these loans fell from 5.61% to 5.51%.
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