After rising for three straight weeks to start the year, mortgage applications fell in the Mortgage Bankers Association’s (MBA) most recent survey.
According to data from the MBA’s Weekly Mortgage Applications Survey for the week ending Jan. 27, the Market Composite Index — a measure of overall mortgage loan application volume — decreased 9% on a seasonally adjusted basis from a week earlier. Unadjusted, the index rose 6% from the previous week, the MBA said.
The Refinance Index decreased 7% from the previous week and was 80% below where it was in the same week last year.
The seasonally adjusted Purchase Index decreased 10% from a week earlier. Unadjusted, the Purchase Index increased 7% from the previous week but was 41% lower than the same week last year.
Yield Spread Narrows
“Mortgage rates declined for the fourth straight week and have now fallen almost 40 basis points over the past month,” said Joel Kan, MBA’s vice president and deputy chief economist. “Treasury yields were higher on average last week, while mortgage rates decreased, which was a sign of a narrowing spread between the two.”
Kan said the spread between mortgage rates and the 10-year Treasury has been abnormally wide since early 2022.
“Further narrowing of that spread is expected to put downward pressure on mortgage rates in the coming months,” he said. “Overall application activity declined last week despite lower rates, which is an indication of the still volatile time of the year for housing activity. Purchase activity is expected to pick up as the spring homebuying season gets underway, bolstered by lower rates and moderating home-price growth. Both trends will help some buyers regain purchasing power.”
The refinance share of mortgage activity decreased to 31.2% of total applications from 31.9% the previous week.
The adjustable-rate mortgage (ARM) share of activity increased to 6.7% of total applications.
The FHA share of total applications ticked up to 12% from 11.9% the previous week. The VA share of total applications decreased to 11.9% from 13% the previous week. The USDA share of total applications, meanwhile, remained unchanged at 0.6% for the fourth straight week.
Mortgage Rates
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.19% from 6.2%, with points decreasing to 0.65 from 0.69 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 5.99% from 5.92%, with points increasing to 0.48 from 0.41 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.18% from 6.22%, with points decreasing to 0.99 from 1.10 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
- The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.5% from 5.54%, with points increasing to 0.73 from 0.51 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
- The average contract interest rate for 5/1 ARMs decreased to 5.38% from 5.44%, with points remaining at 0.83 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The survey covers over 75% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100.
