Mortgage applications experienced a significant decline of 9.4% during the week ending Dec. 29, 2023, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The results were adjusted to account for the holiday season.
The Market Composite Index, a mortgage loan application volume gauge, exhibited a 9.4% drop when seasonally adjusted compared to two weeks prior. On an unadjusted basis, this index saw a substantial 38% decrease compared to the preceding two weeks.
The unadjusted Refinance Index, measuring refinancing activity, recorded a 43% decrease compared to two weeks ago. However, it was still 15% higher than the corresponding week from the previous year. In contrast, the seasonally adjusted Purchase Index, which reflects new home purchase applications, dropped by 5% compared to the previous two weeks. The unadjusted Purchase Index registered a 34% decrease compared to two weeks ago and was 12% lower than the same period in 2022.
“Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023. The 30-year fixed mortgage rate edged higher last week and ended 2023 at 6.76%, over a percentage point lower than its recent peak of 7.9% in October 2023,” said Joel Kan, MBA’s deputy chief economist. “The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response, with the overall level of purchase activity 12% lower than a year ago. Refinance applications were still at very low levels but were 15% higher than a year ago.”
Kan said while the recent decline in mortgage rates has been encouraging for the housing market, purchase applications have yet to respond positively, with overall purchase activity being 12% lower than the previous year.
“The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months [to] come," Kan said.
The report also highlighted shifts in mortgage activity shares. The refinance share of mortgage activity decreased to 36.3% from 39.4% in the previous week, while the adjustable-rate mortgage (ARM) share of activity dropped to 6% of total applications.
Additionally, the FHA share of total applications decreased to 14.5% from 15% the previous week, and the VA share declined to 14.6% from 17.3%. However, the USDA share of total applications increased slightly to 0.5% from 0.4%.
Regarding mortgage interest rates, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased slightly to 6.76% from 6.71%, with points increasing to 0.61 from 0.55 (including the origination fee). The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances rose to 6.86% from 6.85%, with points increasing to 0.41 from 0.34. The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA inched up to 6.51% from 6.50%, with points increasing to 0.86 from 0.73. Meanwhile, the average contract interest rate for 15-year fixed-rate mortgages decreased to 6.26% from 6.41%, with points increasing to 0.73 from 0.50. Finally, the average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) decreased to 5.71% from 6.26%, with points remaining at 0.59.
