Applications decrease as mortgage demand remains sensitive to rates

Mortgage applications fell 8.8%, prompting a pullback in application activity, according to the Mortgage Bankers Association’s latest survey for the week ending April 14.

Home loan application volume declined 8.8% on a seasonally adjusted, week-over-week basis. When unadjusted, application activity was down 8% from the previous week.

“With more first-time homebuyers in the market, we continue to see increased sensitivity to rate changes. The 30-year fixed rate increased 13 basis points to 6.43%, which led to purchase applications declining 10%,” noted Joel Kan, MBA’s vice president and chief economist. “Affordability challenges persist, and there is limited for-sale inventory in many markets across the country, so buyers remain selective on when they act.”

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Applications for mortgage refinances dropped 6%, and purchase activity plummeted 10% from one week earlier. Refinances accounted for just over a quarter (27.6%) of total applications, as rates remained more than a full percentage point above the same week a year ago.

“This leaves very little refinance incentive for most homeowners,” Kan said.

The FHA share of total application volume grew four basis points to 12.7%. VA loans made up 11.7%, and USDA loans comprised 0.5% of the overall application figure.

“The 10% drop in FHA purchase applications, and the increase in the average purchase loan size to its highest level in a month, are other indications that first-time buyers have pulled back,” Kan said. “The spread between the jumbo and conforming 30-year fixed rates widened slightly last week to 15 basis points, but this was a much tighter spread compared to the past year. As banks reduce their willingness to hold jumbo loans, we expect this narrowing trend to continue.”

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