Taking into account the Labor Day holiday, mortgage applications dipped 0.8% from the previous week, as reported by the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending Sept. 8, 2023.
A look at the metrics shows that the Market Composite Index, a key indicator of mortgage loan application volume, slid 0.8% on a seasonally adjusted basis compared to the week before. Without the seasonal adjustment, the index fell sharply by 12%. Refinance applications, in particular, saw a decline of 5% week over week and a significant 31% from the same period the prior year. Conversely, the Purchase Index grew by 1% from the preceding week. However, without adjustments, it's down 11% week over week and a notable 27% from the same week a year ago.
"Last week’s decline was driven by a 5 percent drop in refinance applications to the weakest reading since January 2023,” said Joel Kan, MBA’s deputy chief economist. “The 30-year fixed mortgage rate increased to 7.27% last week and was 40 basis points higher than where it was in late July. Purchase applications increased over the week despite the increase in rates, pushed higher by a 2% gain in conventional loans. Given how high rates are right now, there continues to be minimal refinance activity and a reduced incentive for homeowners to sell and buy a new home at a higher rate.”
A deeper dive into the data shows:
- Refinance-related activities dropped to 29.1% of the total from 30.0% the week before.
- Adjustable-rate mortgages (ARM) rose, accounting for 7.5% of all applications.
- Applications for Federal Housing Administration (FHA) loans increased to 14.2% from last week’s 13.7%.
- VA loan applications held steady at 11.3%.
- USDA loans recorded a minor decline, registering 0.4% versus 0.6% a week ago.
- On the topic of interest rates: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan limits rose to 7.27% from 7.21%.
- Jumbo loans (those exceeding $726,200) experienced a rate increase, moving to 7.25% from 7.21% a week before.
- Mortgages backed by the FHA saw their 30-year fixed rate climb slightly to 7.04% from 7.03%.
- 15-year fixed-rate mortgages witnessed their rates go up to 6.72% from 6.66%.
- As for the 5/1 ARMs, rates surged to 6.59% from the earlier 6.33%.
These continuous rate hikes suggest evolving dynamics in the housing market, prompting homeowners to rethink their decisions amidst the backdrop of rising costs
