Loan applications increase as borrowers respond to a decline in 30-year fixed-rate mortgage
Mortgage applications climbed last week, driven by a surge in refinance activity as declining interest rates enticed borrowers with higher-rate loans.
The Mortgage Bankers Association’s (MBA) weekly survey reported a 5.4% increase in application volume on a seasonally adjusted basis compared to the prior week. On an unadjusted basis, applications jumped 50%, reflecting adjustments for the Thanksgiving holiday.
Joel Kan, MBA’s vice president and deputy chief economist, attributed the rise to borrowers acting quickly to lower their payments amid a continued drop in mortgage rates.
“Mortgage rates decreased again for the third consecutive week,” Kan said, noting that the average interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) declined to 6.67% from 6.69% the previous week.
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“Applications increased 5%, driven by a 27% surge in refinance activity, as borrowers with higher rates acted on the chance to lower their payments,” Kan added. “VA refinance applications were up 85% from the previous week, matching some of the larger swings in VA activity reported in recent months.”
Refinance applications saw a 27% week-over-week increase, marking a 42% jump compared to the same week a year ago. The refinance share of total applications also grew, reaching 46.8%, up from 38.7% the previous week.
Meanwhile, government-backed loans, such as FHA and VA, saw a slight increase in market share. FHA applications rose to 16.5% from 16.0%, and VA applications increased to 16.3% from 13.6%. Adjustable-rate mortgage (ARM) applications, however, decreased to 5.3% of total applications.
While refinance activity surged, purchase applications presented a mixed picture. The seasonally adjusted Purchase Index fell by 4% from the previous week, but on an unadjusted basis, it rose 30%. Compared to the same period last year, purchase applications were up 4%.
Kan noted that sustained housing demand and gradually increasing inventory in many markets have kept purchase activity relatively strong despite affordability challenges.
“Purchase applications remained relatively strong and have shown annual gains in all but one week over the past three months,” he said. “In addition to lower rates, purchase activity continues to be supported by sustained housing demand and inventory that continues to grow gradually in many markets.”
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