Rates Fall 11 BPS, Applications Rally

Mortgage applications rallied last week as a slowing jobs market and positive indications from the Central Bank led to rates plummeting. 

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — rose by 2.6%, reversing last week’s 2.3% dip.

Adjusted purchase applications increased by 2%, while the unadjusted index was up 2% and 17% lower YOY. 

Rates declined for the first time since March, falling a full 11 bps to 7.18%.

FHA loans drove the upward push, jumping 5%, as their rates plummeted to 6.92%. It’s been weeks since these rates were last below 7%.

“First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these homebuyers. The gain in FHA activity is a sign that this segment of the market is active,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist.

Refinances also saw a boost of 5%, including a massive 29% jump in VA refis, but nonetheless remain down 6% from the same time last year. Refis accounted for 30.6% of applications, an improvement but still far below historical levels.

The ARM share of activity fell to 7.7% of total applications.

U.S. employers added only 175,000 jobs in April, down from March and hugely undercutting analyst expectations. Wage growth also cooled to its slowest pace since 2021. In total, the latest data point to softening inflation.

“It was a slowdown that the Fed and many market participants have been wanting for some time,” George Mateyo, chief investment officer at Key Wealth told Forbes, calling the data “just what the Fed chair wanted.”

Chair Jerome Powell noted that the data is positive but that inflation remains “too high.”

Analysts are now betting on a September rate cut.

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