With the last FOMC meeting and interest rate cuts of the year in the rear-view mirror, combined with typical holiday time slowdowns, economists were not surprised to see a decrease in mortgage applications this week.
According to the latest Mortgage Bankers Association (MBA) report, the Market Composite Index—the measure of mortgage loan activity volume—decreased 3.8% from one week earlier on a seasonally adjusted basis for the week ending Dec. 12, following last week’s 4.8% increase for the week ending Dec. 5 On an unadjusted basis, the Index decreased 5% compared with the previous week.
“Mortgage rates inched up last week following the FOMC meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly,” said Mike Fratantoni, MBA’s SVP and chief economist. “Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59 percent last week, the highest level since September.”
According to MBA, the seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 7% compared with the previous week and was 13% higher than the same week one year ago.
MBA reported that the Refinance Index decreased 4% from the previous week and was 86% higher than the same week one year ago, continuing to reflect ongoing gradual improvement in market conditions over last year.
The refinance share of mortgage activity increased to 59.0% of total applications from 58.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.2% of total applications.
Kan pointed out, “Refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range.”
Government-backed loans were mixed this week, with the FHA share of total applications decreasing to 19.5% from 20.2% the week prior, the VA share of total applications increasing to 16.6% from 16.4% the week prior and the USDA share of total applications increasing to 0.4% from 0.3 % the week prior.
For additional data from this week’s report, click here.
