Mortgage applications have experienced a notable increase in the past week, primarily fueled by refinance activity as interest rates for most loan types plunged, as per insights from the Mortgage Bankers Association. The market composite index, which serves as a benchmark for loan application volume, surged by 5.4% for the week ending December 6th on a seasonally adjusted basis, following a 2.8% rise the previous week.
Unadjusted figures showed a dramatic 50% uptick compared to the week before. The refinance index saw a remarkable 27% increase week-on-week. "Borrowers with higher rates capitalized on the opportunity to reduce their payments," explained Joel Kan, deputy chief economist at the association. Notably, Veteran Affairs refinance applications soared by 85% from the previous week, matching some of the significant fluctuations in VA activity observed in recent months.
Year-on-year, the refinance index rose by 42%. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less slipped to 6.67%, down from 6.69% a week prior. For loan balances exceeding that amount, the rate fell to 6.79%, down from 6.85%. Meanwhile, 15-year loans held steady at 6.12% week-over-week.
The interest rates for fixed-rate 30-year mortgages backed by the Federal Housing Administration dipped to 6.47%, down from 6.49% this past week. Additionally, the share of FHA loans, typically utilized by first-time home buyers due to lower down payment requirements, increased from 16% to 16.5% of total applications.
Despite a 4% decline in the seasonally adjusted purchase index from a week ago, the unadjusted purchase index saw a 30% increase week-over-week, marking a 4% rise annually. Kan noted, "Purchase applications remained relatively robust and have exhibited yearly growth in all but one week over the last three months." He added, "Alongside decreasing rates, the demand for housing continues to thrive, supported by a gradually growing inventory across numerous markets.".