In a recent report from the Mortgage Bankers Association (MBA), the mortgage application volume has shown a positive shift, primarily driven by an uptick in purchase activity. For the week ending August 23, the market composite index, which assesses the overall loan application volume, witnessed a slight increase of 0.5% on a seasonally adjusted basis.
This marks a recovery from the previous week’s significant decline of 10%. When comparing the index without seasonal adjustments, there was a modest decrease of 1% from the prior week’s figures. The purchase index, a key metric indicating the volume of new home purchase applications, reported a 1% increase on a seasonally adjusted basis.
Yet, without adjustments for the season, this index experienced a slight decline of 1% compared to the previous week, revealing a notable 9% decrease year-over-year. Joel Kan, the deputy chief economist at MBA, stated, "Mortgage applications were slightly higher, driven by marginally stronger purchase activity." Despite the recent drop in mortgage rates, he emphasized that purchase applications have remained somewhat stagnant. As of August 23, the average interest rate for 30-year fixed-rate mortgages with loan balances of $766,550 or less has decreased to 6.44%.
This represents the lowest rate observed since April 2023, falling from 6.5% the prior week. Conversely, for loan balances exceeding $766,550, the mortgage rates have risen to 6.75%, increasing from 6.68% in the previous week. For 15-year fixed mortgages, there has also been a slight decline, with rates dropping to 5.88% from 6.04%. Kan noted, "Rates have now come down more than 80 basis points from a year ago." He pointed out that potential homebuyers are exercising patience as interest rates continue to decrease and the inventory of homes for sale begins to rise.
This trend reflects a shift in the housing market dynamics, where buyers are becoming more discerning as factors such as affordability and inventory levels change. Further analysis revealed that fixed-rate mortgages with 30-year terms, which are backed by the Federal Housing Administration (FHA), have also seen a decline in rates, moving down to 6.36% from 6.42% on a weekly basis.
It is noteworthy that the share of FHA loans, often favored by first-time homebuyers due to the possibility of lower down payments, saw a minor reduction, accounting for 15.3% of total applications compared to 15.6% from the previous week. On the refinancing front, the refinance index decreased slightly by 0.1% on a weekly basis, yet it remains significantly higher, by 85%, compared to the same period last year.
This surge indicates that borrowers, particularly those utilizing FHA and Veterans Affairs (VA) loans, continue to engage actively in the market. Kan concluded that this ongoing interest in refinancing reflects the changing landscape of borrowing amidst fluctuating rates..