Mortgage applications have seen a decrease for the second consecutive week, marking a significant shift in the housing market dynamics. The 30-year fixed rate for conforming loan balances has surged to its highest level since August, as reported by the Mortgage Bankers Association. The market composite index, a critical measure of loan application volume, dropped by 5.1% for the week ending October 4, when adjusted for seasonal variations.
This decline followed a prior drop of 1.3%. In absolute terms, the index exhibited a 5% decrease compared to the previous week. Mike Fratantoni, the chief economist of the association, indicated that stronger economic data from the previous week, which included a robust September jobs report, played a role in driving mortgage rates upward.
The Bureau of Labor Statistics shared that the US economy added more jobs than anticipated in September, while the unemployment rate experienced a slight decrease. The refinance index witnessed a significant decline of 9% on a weekly basis; however, it shows an impressive surge of 159% year over year, according to the Mortgage Bankers Association.
Fratantoni elucidated that conventional loan refinances, which typically involve larger balances compared to government loans, are more sensitive to changes in mortgage rates and reflected a more pronounced decrease this past week. Interest rates for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less rose to 6.36% from the previous 6.14%.
For loan amounts exceeding this threshold, the rate escalated to 6.64% from 6.5%. Furthermore, 15-year loans also saw an upward trend, climbing to 5.71% from 5.51%. Mortgages with 30-year terms backed by the Federal Housing Administration (FHA) increased to 6.22% from 6.06% within the weekly period.
The proportion of FHA loans, often utilized by first-time home buyers due to their lower down payment requirements, decreased to 16.2% of total applications, down from 16.6% the previous week. The purchase index experienced a marginal dip of 0.1% compared to the prior week on an adjusted basis, although without adjustments, the index slightly increased by 0.1% sequentially and recorded an 8% gain compared to the same period last year. Fratantoni noted, "The largest constraint for many prospective homebuyers over the past year had been the lack of inventory.
Now, there are more homes available in many markets across the country, and with mortgage rates still low compared to recent history, at least some potential homebuyers are moving ahead.".