Mortgage loan application volume rose again, with refinances up 6% as interest rates hit a three-month low, according to the Mortgage Bankers Association’s weekly survey.
Refinances remain 85% lower than the same time last year, however, comprising 31.3% of total applications.
Purchases took a hit with the adjusted purchase and unadjusted purchase indices down by 0.1% and 3%, respectively.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell from 6.42% to 6.34%, its lowest point since September.
Despite that, the adjusted Market Composite Index, a measure of mortgage loan application volume, increased by just 0.9%.
“This is a particularly slow time of year for homebuying, so it is not surprising that purchase applications did not move much in response to lower mortgage rates,” said Mike Fratantoni, MBA’s SVP and Chief Economist.
Housing starts and permits slid again in November as inflationary pressure and high rates kept demand down, marking three months of declines.
“The latest data on the housing market show that homebuilders are pulling back the pace of new construction in response to low levels of traffic, and we expect this weakness in demand will persist in 2023, as the U.S. is likely to enter a recession,” Fratantoni said.
U.S. home price growth is now half of what it was in April, when appreciation peaked.
While price growth remains in the double digits, it is expected to continue slowing into the new year.
“However, if mortgage rates continue to trend down, as we are forecasting, more buyers are likely to return to the market later in the year, as affordability improves with both lower rates and slower home-price growth.”
Other key findings include:
The ARM share of activity fell by 0.2% to 7.5% of applications.
The FHA share of total applications dipped to 13.0% from 13.1%, with an average interest rate of 6.35%.
The VA share rose to 11.9% from 11.5%, and the USDA share remained unchanged at 0.6%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances decreased to 5.97% from 6.14%, and for 5/1 ARMs fell from 5.58% to 5.43%.
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