Mortgage applications saw a notable increase of 2.8% in the week ending Dec. 1, 2023, according to data released by the Mortgage Bankers Association (MBA). This uptick came following adjustments made to account for the Thanksgiving holiday and is the fifth straight week of increases.
The Market Composite Index, which measures mortgage loan application volume, displayed a 2.8% increase on a seasonally adjusted basis from the previous week. On an unadjusted basis, this index soared by an impressive 43% compared to the week prior.
Refinancing activity experienced an increase too, with the Refinance Index showing a substantial 14% increase from the previous week. This figure was also 10% higher than the same period last year. In contrast, the seasonally adjusted Purchase Index dipped slightly by 0.3% from the previous week. However, on an unadjusted basis, the Purchase Index registered a significant 35% increase compared to the previous week but remained 17% lower than the same period in the previous year.
The 30-year fixed-rate mortgage fell to 7.17%, marking the lowest level since August 2023.
"Slower inflation and financial markets anticipating the potential end of the Fed’s hiking cycle, are both behind the recent decline in rates,” said Joel Kan, MBA’s deputy chief economist. “Refinance applications saw the strongest week in two months, increasing on a year-over-year basis for the second consecutive week for the first time since late 2021. The overall level of refinance applications is still very low, but recent increases could signal that 2023 was the low point in this cycle for refinance activity, consistent with our originations forecast."
However, the purchase applications remained 17% lower than the previous year period, attributed to low inventory and challenging affordability conditions.
The refinance share of mortgage activity increased to 34.7% of total applications from 30.6% in the previous week, while the adjustable-rate mortgage (ARM) share of activity decreased to 7.4% of total applications.
The Federal Housing Administration (FHA) share of total applications rose to 15% from 13.5% in the previous week, and the Veterans Affairs (VA) share increased to 12.8% from 12.6% in the prior week. The United States Department of Agriculture (USDA) share of total applications remained unchanged at 0.5%.
In terms of interest rates, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 7.17%, with points decreasing to 0.60. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances dropped to 7.35%, with points decreasing to 0.44.
For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate decreased to 6.98%, with points increasing to 0.84. Meanwhile, the average contract interest rate for 15-year fixed-rate mortgages decreased to 6.80%, with points increasing to 0.77. Lastly, the average contract interest rate for 5/1 ARMs decreased to 6.58%, with points decreasing to 0.69.
These figures suggest that favorable mortgage rates are contributing to increased refinance activity, while home purchases continue to face challenges due to low inventory and affordability concerns.
