Refinances Retreat Despite Rates Cooling Further

Mortgage applications rose again last week as government purchase activity made up for retreating refinances.

The Mortgage Bankers Association’s weekly survey shows that the adjusted Market Composite Index — a measure of mortgage loan application volume — increased by 1.6%, slightly better than the week prior’s 0.5%.

Adjusted purchase applications rose by 3%, while the unadjusted index increased by 1% and was 4% lower year-over-year.

Rates decreased for a fifth consecutive week, slipping to 6.43%. Refinances had been driving application activity until this report, which found that government purchase applications stole the show.

“Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments. Similar to purchase activity, refinance activity has picked up across the various loan types,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.

Added Kan, “The refinance share of applications averaged almost 46 percent in August, the highest monthly average since March 2022.” 

Refis skyrocketed when rates began to cool, but the frenzy has calmed somewhat. The refinance index was down 0.3% from the previous week but up 94% YOY. 

Refis accounted for 46.4% of applications, an increase from last week. On the month, they averaged nearly 46%, their highest since March 2022.

First-time buyers remain out of luck as inventory shortages keep home prices high. Without a house to borrow against, saving for a down payment is a struggle.

The typical homebuyer put down 18.6% of the purchase price, totaling more than $67,000 and up from 15% last year.

Almost three in five buyers put down at least 10% of the purchase price, one of the highest shares in Redfin’s record.