After last week’s major uptick in mortgage loan applications, borrower activity remains high. Yet, despite a slowly falling 30-year fixed mortgage rate (FRM) at around 6.26%, mortgage application growth begins to cool down alongside the weather.
The Mortgage Bankers Association (MBA) reported only a nominal 0.6% increase in the market composite index—the measure of mortgage loan application volume—for the week ending Sept. 19.
The previous survey reported an increase of nearly 30% in mortgage applications, likely caused by borrowers who were prepared for the Federal Reserve’s (Fed) decision to cut back interest rates by 0.25%. The decision was made in light of a worsening job market, Fed Chair Jerome Powell said, after the Bureau of Labor Statistics’ (BLS) disappointing results in the August jobs report.
While growth has significantly slowed down to just a 0.6% adjusted increase, mortgage applications only grew 0.1% on an unadjusted basis.
MBA’s Senior Vice President and Chief Economist, Mike Fratantoni, said, “Mortgage rates declined further last week, with the 30-year fixed rate falling to its lowest level since last September to 6.34%. Interest rates generally have moved up following the FOMC meeting last week but remain in a range that should continue to lead to increased refinance activity.”
Although the volume of refinanced mortgage applications only increased 1% from the previous survey, it’s a notable 42% jump from the same period last year. The share of refinanced mortgages also increased slightly on a weekly basis from 59.8% to 60.2%.
“Refinance volume increased further last week and is now 80% higher than four weeks ago, accounting for more than 60% of all application activity. The refinance boost last week was from government applications, with VA refinance volume up almost 15%.” Fratantoni said.
While refinance applications continue to grow week to week, the market composite for purchase applications saw minor changes. The purchase index increased slightly from last week by 0.3% on an adjusted basis and dropped 0.9% on an unadjusted basis. This is slightly lower than last week’s results at a 0.9% decrease, but is still significantly higher than the same week last year.
“While homebuyer demand typically tends to decrease during the fall, purchase application activity remains relatively strong right now, running 18% ahead of last year’s pace,” Fratantoni said.
As the share of refinance applications grew, other applications saw both gains and losses. The share of adjustable-rate mortgages (ARMs) decreased to 8.9% of total applications. On a seasonally adjusted basis, the volume of ARMs decreased by 30.6%, nearly a 40% drop from the previous survey. But it is still about 98% higher than the number of applications in 2024.
Government-backed loans also had some ups and downs last week. The share of FHA applications decreased to 15.7%, after being 16.3% in last week’s survey. VA loans increased as well, jumping from last week’s share of 15.8% to 17.5%. The share of USDA applications decreased alongside FHA applications, albeit very slightly from 0.5% down to 0.4%.
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