Mortgage applications dropped slightly last week due to increasing rates across all loan types, with the 30-year fixed rate for conforming loan balances hitting its peak level since July, as reported by the Mortgage Bankers Association on Wednesday. The market composite index, which assesses loan application volumes, fell 0.1% for the week ending on Oct.
25 after a significant 6.7% decrease the previous week. Without seasonal adjustments, the index lowered by 1% compared to the last week. "After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27%, driven by a pullback in refinances," noted Joel Kan, the association's deputy chief economist. The refinance index dropped by 6% week-over-week.
"Government refinances contributed significantly to this decrease, falling by 12% compared to last week," Kan added. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less escalated to 6.73%, marking its highest since July, up from 6.52% the previous week.
For loan balances exceeding that threshold, the rate increased to 6.77% from 6.73%. Meanwhile, rates for 15-year loans rose to 6.27%, up from 5.98%. Fixed-rate mortgages with 30-year terms backed by the Federal Housing Administration also saw a rise, hitting 6.55% from 6.29% on a weekly basis. The share of FHA loans, often favored by first-time home buyers for their lower down payment options, fell to 16.4% of total applications, down from 16.9% the week before. "Rates have increased for the fourth time in five weeks, influenced by bond market fluctuations ahead of the presidential election and the upcoming Federal Open Market Committee meeting," Kan commented.
The US elections are scheduled for Nov. 5, while the Federal Reserve's monetary policy committee will unveil its interest rate decision on Nov. 7. The purchase index increased by 5% from the previous week. Without seasonal adjustments, this index climbed 4% week-over-week and 10% year-over-year. "Although short-term purchase application activity has diminished, we anticipate sustained housing demand from younger homebuyers will bolster purchase growth over the coming years as for-sale inventory gradually becomes more available," Kan concluded..