Mortgage Apps Rise Again As Rates Dip

Mortgage applications increased again last week while banking troubles forced rates down.

The Mortgage Bankers Association’s weekly survey shows the adjusted Market Composite Index – a measure of mortgage loan application volume – rose by 6.5 %.

The average interest rate for 30-year fixed loans fell from 6.79% to 6.71%, giving borrowers brief respite from a month of increases.

Adjusted purchase applications increased by 7%, while the unadjusted index was up 8% from the week before and was 38% lower YOY. This is the second consecutive week of increased purchase demand.

“Treasury yields declined late last week, as market concerns over bank closures and the potential for broader ripple effects triggered a flight to safety in Treasury bonds. This decline pushed mortgage rates for all loan types lower,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

“Home-purchase applications increased for the second straight week but remained almost 40% below last year’s pace. While lower rates should buoy housing demand, the financial market volatility may cause buyers to pause their decisions.”

The Silicon Valley Bank meltdown led to 10-year Treasury bonds falling Monday to their lowest level since early February.

Mortgage rates, which follow these bonds, declined to 6.57% that day.

Analysts are mixed on where the Fed will go from here. Chairman Jerome Powell had hinted at greater rate hikes in the future, but that was prior to SVB’s collapse and new inflation data. Some experts now expect the central bank to either push another small increase or pause rate hikes entirely. Economists at Nomura Securities are even saying a rate cut may be on the table.

Refinances were up 5% from the week prior, though they remain 74% lower than the same time last year, comprising only 28.2% 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.

The share of ARM activity dipped after weeks of increases. ARMs accounted for 8.5% of applications, and the rates for these loans fell from 5.75% to 5.69%.

Other key findings include:

-The FHA share of total applications rose to 12.9%, with an average interest rate of 6.58%, up from 6.56%.

-The VA share dropped to 11.9% from 12%, and the USDA share remained unchanged at 0.5%.

-The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances fell to 6.39% from 6.49%.

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