Mortgage applications dropped the last week of December, but the rate of filings is up 9.9% over the previous week according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The results account for an adjustment to accommodate the New Year's holiday.
“Despite an uptick in mortgage rates to start 2024, applications increased after adjusting for the holiday,” MBA Vice President and Deputy Chief Economist Joel Kan said. “The increase in purchase and refinance applications for both conventional and government loans is promising to start the year but was likely due to some catch-up in activity after the holiday season and year-end rate declines. Mortgage rates and applications have been volatile in recent weeks and overall activity remains low.”
The Market Composite Index, which serves as a gauge for mortgage loan application volume, increased by 9.9% and witnessed a 45% increase compared to the previous week.
Specifically, the holiday-adjusted Refinance Index surged by 19% from the prior week and was 30% higher than the same week in the previous year. The unadjusted Refinance Index exhibited a 53% increase from the prior week and was 17% higher than the same week in the prior year. The seasonally-adjusted Purchase Index also saw a substantial rise of 6% from the previous week. On an unadjusted basis, the Purchase Index recorded a 40% increase compared to the previous week, although it remained 16% lower than the same week in the prior year.
The refinance share of mortgage activity increased to 38.3% of total applications from the previous week's 36.3%. Meanwhile, the adjustable-rate mortgage (ARM) share of activity decreased to 5.4% of total applications.
In terms of government-backed loans, the FHA share of total applications decreased slightly to 14.4% from 14.5% the previous week. Conversely, the VA share of total applications increased to 16.3% from 14.6% the previous week. The USDA share of total applications decreased marginally to 0.4% from 0.5% the previous week.
With rising rates impacting the market, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 6.81% from 6.76%. For these loans, points remained unchanged at 0.61 (including the origination fee) for 80% loan-to-value ratio (LTV) loans, although the effective rate did increase from the prior week.
For 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200), the average contract interest rate increased to 6.98% from 6.86%. Points increased to 0.43 from 0.41 (including the origination fee) for 80% LTV loans. The effective rate also witnessed an increase.
For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate increased to 6.56% from 6.51%, with points decreasing slightly to 0.84 from 0.86 (including the origination fee) for 80% LTV loans. The effective rate saw an increase from the previous week.
The 15-year fixed-rate mortgages also saw a rise in the average contract interest rate, increasing to 6.41% from 6.26%. Points decreased to 0.55 from 0.73 (including the origination fee) for 80% LTV loans. The effective rate was higher compared to the previous week.
Finally, the average contract interest rate for 5/1 ARMs increased to 6.17% from 5.71%, with points decreasing to 0.56 from 0.59 (including the origination fee) for 80% LTV loans. The effective rate increased from the previous week, showcasing the impact of rising rates on ARMs.
