Mortgage applications have experienced a notable increase for the third consecutive week, fueled by a rise in purchase activity alongside declining interest rates for the first time in over two months, as reported by the Mortgage Bankers Association on Wednesday. The market composite index, which serves as a metric for loan application volume, surged by 6.3% for the week ending November 22, following a 1.7% increase the previous week and a 0.5% rise the week before.
Without seasonal adjustments, the index rose 3% compared to the prior week. "Purchase activity drove overall applications higher last week, as conventional purchase applications picked up pace," noted Joel Kan, the association's deputy chief economist. The seasonally adjusted purchase index climbed 12% from a week ago, while without adjustments, it jumped 7% week over week, reflecting an impressive 52% increase year-over-year. "The increase in conventional purchase applications helped push the average purchase loan size to $439,200, its highest level in almost a month," Kan highlighted. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances of $766,550 or less fell to 6.86% from the previous week’s 6.9%.
For loan balances exceeding this threshold, the rate decreased to 6.97% from 7.03%. For 15-year loans, the rate also showed a decline, moving down to 6.29% from 6.32% week to week. Fixed-rate mortgages with 30-year terms backed by the Federal Housing Administration saw a drop to 6.61% from 6.68% during the week.
The share of FHA loans, commonly utilized by first-time home buyers and featuring lower down payments, decreased to 16% of total applications from 16.6% reported the previous week. "With the increase in for-sale inventory and indications of a robust economy, buyers have remained active in the market despite recent rate hikes," Kan stated.
He further remarked, "Applications are significantly higher compared to a year ago by most measures; however, this year's comparison is against the week of Thanksgiving 2023, which fell a week earlier." In contrast, the refinance index fell by 3% week-over-week, primarily influenced by declines in FHA and Veteran Affairs refinances, Kan observed.
Nonetheless, on an annual basis, the refinance index saw an impressive surge of 119%..