In the wake of a positive jobs report and subsequent rise in mortgage rates, more prospective borrowers held back this past week.
Mortgage applications fell by 5.1% the week ending October 4, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey. Application volume, as measured by the MBA’s Market Composite Index, decreased 5% on an unadjusted basis, compared with the previous week.
Although the Refinance Index decreased 9% from the previous week, it was still 159% higher than the same week one year ago.
For historical perspective, the week ending October 4, 2023, saw the 30-year fixed mortgage rate rise to 7.53% – the highest it had been since the year 2000. This drove loan applications down to their lowest level since 1996.
Purchase applications were up slightly from a year ago – at an increase of 8% annually, but down an inconsequential 0.1% from the week prior.
“In the wake of stronger economic data last week, including the September jobs report, mortgage rates moved higher, with the 30-year fixed rate rising to 6.36 percent – the highest since August,” MBA’s SVP and Chief Economist Mike Fratantoni pointed out. “Conventional loan refinances, which tend to have larger balances than government loans and hence are more responsive for a given change in mortgage rates, fell to a greater extent over the week.”
People in the market to buy homes this past year have not only faced higher-than-normal mortgage rates, but also record-low inventory. While the housing supply has since picked up and rates have decreased, buyers have been slow to jump back in. The Fannie Mae Home Purchase Sentiment Index (HPSI)rose by 1.8 points in September, indicating increasing consumer optimism in buying.
“Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead,” Fratantoni added.
Among total mortgage applications submitted this past week, the refinance share fell to 52.4% from 54.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.9% of total applications.
Meanwhile, the FHA share of total applications decreased to 16.2% from 16.6% the week prior. The VA share of total applications increased to 16.9% from 15.4% the week prior. The USDA share of total applications remained unchanged at 0.4% from the week prior.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.36% from 6.14% with points increasing to 0.62 from 0.61 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate increased from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $766,550) increased to 6.64% from 6.5%, with points increasing to 0.50 from 0.36 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
