In a noteworthy development for the housing market, mortgage applications have seen a positive trend, marking an increase for the second consecutive week. The Mortgage Bankers Association (MBA) reported on Wednesday that rates across most loan types have declined, contributing to this noteworthy rise. The market composite index, a crucial measure of loan application volume, has risen by 1.6% for the week that ended on August 30, based on seasonally adjusted figures.
This follows a previous weekly increase of 0.5%. When viewed without seasonal adjustments, the index experienced a slight uptick of 0.2% compared to the previous week. Refinance activity, while experiencing a minor downturn of 0.3% on a weekly basis, showcases a whopping annual surge of 94%. "Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments," commented Joel Kan, the deputy chief economist at MBA.
He further noted that similar to the patterns observed in purchase activity, refinance activity has seen an uptick across various loan types. Notably, the share of refinancing applications averaged nearly 46% in August, which marks the highest monthly percentage since March 2022, confirming the strong interest in refinancing options among borrowers. In terms of interest rates, the average rate for 30-year fixed-rate mortgages, applicable to loans with balances of $766,550 or less, saw a modest decrease to 6.43%, down from 6.44% the previous week.
For loans exceeding this amount, the rate dropped to 6.73% from 6.75%. Conversely, the rate for 15-year loans experienced an increase, rising to 5.98% from a previous 5.88%. Additionally, fixed-rate mortgages with 30-year terms that are backed by the Federal Housing Administration (FHA) slipped to 6.3% from a preceding 6.36% on a weekly basis.
The share of FHA loans, which are often sought after by first-time homebuyers due to typically smaller down payments, saw a decline, dropping to 14.6% of the total applications as compared to 15.3% the week prior. Encouragingly, the purchase index experienced a rise of 3% from the week before on a seasonally adjusted basis.
"This increase brings purchase activity closer to the levels seen last year, with government purchase applications leading the way," Kan elaborated. Excluding seasonal adjustments, the index inched up by 1% from the preceding week, albeit reflecting a 4% decline year over year. Overall, these shifts in the mortgage application landscape indicate a responsive market adapting to changing interest rates and refinancing opportunities, a trend that is expected to impact the overall housing market dynamics significantly..