Mortgage applications increased for a third week as buyers take advantage of retreating rates.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – rose by 3%.
Mortgage rates fell for a second week as a wobbly banking sector pushed treasury yields down. The average interest rate for 30-year fixed loans fell from 6.71% to 6.48%. This is its lowest level in a month.
“Both purchase and refinance applications increased for the third week in a row as borrowers took the opportunity to act, even though overall application volume remains at relatively low levels,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Adjusted purchase applications increased by 2%, while the unadjusted index was up 3% from the week before and was 36% lower YOY.
Refinances were up 5% from the week prior, though they remain 68% lower than the same time last year, comprising only 28.6% of total applications.
Rates are still two percentage points higher than the same time last year, making refinancing unattractive for many borrowers who locked in rates prior to increases. In the past decade, refis averaged 58% of total activity.
Kan noted that rates did not fall by as much as Treasury rates due to MBS market volatility. The yield on the 10-year Treasury note fell more than half a percentage point, the largest dip since the 2008 financial crisis excluding the beginning of the pandemic. Rates dropped by a more moderate 0.31%, and the spread between the two rates was 300 BPS, much higher than the typical 180 BPS.
Homebuyers can save on their monthly payments with even a small rate decrease. But declines may not last long. The banking sector is rallying some after a week of uncertainty, and daily mortgage rates inched up at the beginning of this week.
The Federal Reserve is meeting this week and it’s unclear whether another significant rate hike is on the table in the wake of last week’s bank troubles. Its decision will offer a clearer picture of where rates may go after.
Other key findings include:
-The FHA share of total applications dropped from 12.9% to 12.3%, with an average interest rate of 6.32%, down from 6.58%.
-The VA share dropped to 11.7% from 11.9%, and the USDA share remained unchanged at 0.5%.
–ARMs accounted for 8.6% of applications, and the rates for these loans fell from 5.69% to 5.58%.
-The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell to 6.30% from 6.39%.
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