Mortgage Applications Rose After May’s FOMC Meeting
Mortgage applications rose last week across the board as rates dipped in the wake of positive news from the Fed.
The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – increased by 6.3%, changing course after last week’s 1.2% decrease.
Adjusted purchase applications rose by 5%, while the unadjusted index was up 5.3% from the week before and 32% lower YOY.
The average interest rate for 30-year fixed loans dipped from 6.50% to 6.48%.
Refinances also showed movement, up 10% from the week prior. They remain 44% lower than the same time last year, however, comprising only 28% of total applications.
In the past decade, refis averaged 58% of total activity.
Joel Kan, MBA’s Vice President and Deputy Chief Economist, noted that the pool of borrowers who would benefit from a refi with 5%+ rates is small, so last week’s boost likely won’t translate to more refis moving forward. But the data suggest that both homeowners and buyers are paying close attention to rates and pouncing on opportunities.
“Mortgage applications responded positively to a drop in rates last week, as the Fed signaled a potential pause at the current level for the federal funds rate in anticipation of inflation slowing and tightening financial conditions that will slow economic and job growth,” Kan said.
Federal Reserve Chair Jerome Powell raised the benchmark rate another quarter-point hike last week but hinted that a pause may be in order next month based on cooling inflation data.
Though nothing is confirmed, the news assured analysts that another major rate jump is unlikely.
“Unexpectedly bad inflation data, more banking turmoil, or failure to raise the U.S. debt ceiling could throw a wrench in the Fed’s plans, but homebuyers and sellers can feel a little more confident that mortgage rates won’t skyrocket again,” Redfin Economics Research Lead Chen Zhao said.
NY Fed President John Williams implied there may not be another increase in statements this week, saying policymakers are no longer providing explicit forward guidance on rates.
Other key findings include:
-The FHA share of total applications fell from 12.5% to 12.1% with an average interest rate of 6.41%, down slightly.
-The VA share increased to 12.9% from 11.3%, and the USDA share fell from 0.5% to 0.4%.
–ARMs accounted for 6.8% of applications, a decrease, and the rates for these loans dropped from 5.48% to 5.35%
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