The Mortgage Bankers Association’s (MBA) latest survey shows that buyers continue to sit on the sidelines as mortgage application loan volume decreased 5.3% from last week. The mortgage loan application volume, or market composite index, surveys mortgage purchases, refinances and other mortgage activities in the past week.
The 5.3% drop this week comes after a 2.7% drop last week; both of those figures are seasonally adjusted. Unadjusted figures show a 5% and 2% decrease for this week and last week, respectively.
Ironically, these decreases in applications come on the tails of a recent reprieve in mortgage rates. The latest Freddie Mac report shows the average 30-year mortgage rate sitting at 7.40%, while as of writing, Mortgage News Daily displays the marginally smaller 7.38%. Both figures are still—thankfully—lower than 7.63% rates earlier this month.
“Mortgage rates decreased for the first time in over two months, with the 30-year fixed rate dropping to 7.41%. However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline,” said Joel Kan, MBA’s vice president and deputy chief economist in a statement.
He added, “It is very clear that the higher mortgage rate environment has cooled the housing market this fall.”
MBA’s Refinance Index cooled 2% this week, and is down 59% from the same week one year ago. The Purchase Index cooled comparatively more, sitting at a 7% decrease from the previous week. Compared to one year ago, though, purchases are only down 18%.
The share of refinances jumped slightly this week from 37.7% to 39.0%. ARMs, or adjustable rate mortgages, stayed firm at a 10.5% share.
ARMs, traditionally seen as more risky than fixed mortgages, may increasingly be a good method to obtain lower rates, at least at the beginning of homeownership. Interest rates for ARM loans are typically fixed for an initial period of five years and then change annually based on market conditions.
MBA’s report recorded a further decrease to 6.46% from 6.54% for 5/1 ARMs, meaning that ARMs now boast a rate spread of nearly one full percentage point over 30-year fixed loans.
Government-backed loans all decreased this week, albeit not dramatically. The FHA share is down 0.1% to 16.3% from 16.4%. The change in USDA’s share is similar, with a decrease to 0.5% from 0.6%. The VA share experienced the largest drop at 0.4%, sitting at 11.5% compared to last week’s 11.9%.
To view the full report, click here.
