Mortgage applications increased for the third week in a row to start the new year, as mortgage rates fell over the same time period, the Mortgage Bankers Association (MBA) said Wednesday.
The Market Composite Index, a measure of mortgage loan application volume, increased 7% on a seasonally adjusted basis from one week earlier, according to the MBA’s Weekly Mortgage Applications Survey for the week ending Jan. 20. This week’s results include an adjustment for the observance of Martin Luther King Jr. Day.
On an unadjusted basis, the index increased 1% compared with the previous week, the MBA said.
The Refinance Index increased 15% from the previous week, but was still down 77% from the same week last year.
The seasonally adjusted Purchase Index increased 3% from a week earlier. Unadjusted, however, it dipped 1% from the previous week and was down 39% from a year earlier.
'Good News' For Homebuyers
“Mortgage rates declined for the third straight week, which is good news for potential homebuyers looking ahead to the spring homebuying season,” said Joel Kan, MBA’s vice president and deputy chief economist. “Mortgage rates on most loan types decreased last week and the 30-year fixed rate reached its lowest level since September 2022 at 6.2%.”
Kan said overall applications increased, thanks to gains in both purchase and refinance activity, but purchase applications remained nearly 40% lower than a year ago.
“Homebuying activity remains tepid, but if rates continue to fall and home prices cool further, we expect to see potential buyers come back into the market,” he said. “Many have been waiting for affordability challenges to subside.”
Kan added, “Despite a 15% increase in refinances, they were still 77% behind last year’s pace, as rates remained more than 2 percentage points higher, thus providing very little refinance incentive for most borrowers who are locked into lower rates.”
The refinance share of mortgage activity increased to 31.9% of total applications from 31.2% the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 6.5% of total applications.
The FHA share of total applications decreased to 11.9% from 13% the week prior, while the VA share increased to 13% from 11.8% the previous week. The USDA share of total applications remained unchanged at 0.6% for the third 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 6.2% from 6.23%, with points increasing to 0.69 from 0.67 (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) decreased to 5.92% from 6.08%, with points increasing to 0.41 from 0.40 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.22% from 6.26%, with points increasing to 1.10 from 1.05 (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 5.54% from 5.58%, with points decreasing to 0.51 from 0.54 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
- The average contract interest rate for 5/1 ARMs increased to 5.44% from 5.31%, with points increasing to 0.83 from 0.74 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The MBA”s 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.
