The dry spell for mortgage applications is showing signs of recovery as consecutive weeks of decreasing activity slows significantly.
The Mortgage Bankers Association (MBA) reports that the market composite index—the measure of mortgage loan activity volume—decreased 0.3% on a seasonally adjusted basis for the week ending Oct. 17. For the week prior to this, the index decreased 1.8% and has been decreasing at a slower rate for the past few weeks.
The drop in severity for the overall decrease of mortgage loan activity is attributed to increases in certain areas. The refinance index increased by 4% on a seasonally adjusted basis from the previous week, and is 81% greater than the same period one year ago.
Joel Kan—MBA’s vice president and deputy chief economist—stated that the jump in refinance activity can be explained by the consistent weekly trend of the average 30-year fixed-rate mortgage lowering, which dropped to as low as 6.27% recently.
“The lowest mortgage rates in a month spurred an increase in refinance activity, including another pickup in ARM applications. The 30-year fixed-rate decreased to 6.37% and all other loan types also decreased,” he said.
While refinance activity increased, the purchase index decreased by 5% on both a seasonally adjusted basis and unadjusted basis. But the purchase index still outperforms last year’s estimates and continues to be 20% higher than the same period in 2024, maintaining its pace from the previous week’s results.
MBA experts reported an optimistic outlook for the housing market in projections made during the MBA’s annual conference in Las Vegas on Oct. 19, expecting modest growth in mortgage and home-buying activity as they estimate loan origination volume to reach $2.2 million in 2026.
With the resurgence in refinance activity, its share in terms of total mortgage activity increased to 55.9%, up from the previous week’s share of 53.6%.
“The refinance index increased 4%, driven by a 6% increase in conventional refinances and a 12% increase in FHA refinance applications, as borrowers remain attentive to these opportunities to lower their monthly mortgage payment. VA refinances bucked the trend and were down 12%,” Kan added.
Government-backed loans saw a few changes last week. The FHA index increased by nearly 6% on both a seasonally adjusted and unadjusted basis. Its share increased to 21.8% of total applications, a slight increase from the prior week which accounted for 20.5%.
The share of VA loans decreased alongside its activity, dropping to just 13.5% of total applications as the VA index dropped by 9.7% on a seasonally adjusted basis. In the previous week’s results, VA loans accounted for nearly 15% of total applications. USDA loans also saw a slight shift. After making up 0.4% of total applications for a few weeks, its streak was broken by decreasing to 0.3% of total applications as the index dropped by nearly 15%.
Adjustable-rate mortgages (ARMs) saw a notable jump in activity, according to the MBA. On a seasonally adjusted basis, the ARM index increased by about 16%. Its share of total applications jumped from 9.3% in the previous week to 10.8% currently.
“ARM applications increased 16% over the week, which pushed the ARM share to 11%, with the ARM rate more than 80 basis points lower than the 30-year fixed-rate. Purchase applications were down over the week but remained 20% higher than a year ago,” Kan said.
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