Borrowers respond to mortgage rate decline with increased applications
Mortgage applications saw a modest rise of 2.5% for the week ending November 3, marking a slight rebound in borrower activity after mortgage rates posted the largest single-week decline since July 2022.
The upswing was recorded across both refinancing and home purchase applications, with the Mortgage Bankers Association’s purchase index edging up by 3% on a seasonally adjusted basis and the refinance index improving by 2% from the week before.
Joel Kan, MBA’s deputy chief economist, noted a significant drop in mortgage rates, contributing to the increase in applications.
Find out what causes mortgage rates to drop in this article.
“The 30-year fixed mortgage rate dropped by 25 basis points to 7.61%, the largest single-week decline since July 2022,” said Kan, attributing the decline to several factors, including the latest Treasury issuance update, a dovish stance from the Federal Reserve, and signs of a slowing job market.
Despite this positive movement, the year-over-year comparison paints a starker picture, with purchase applications trailing by 20% compared to the same week in the prior year. This indicates ongoing hesitancy among potential homebuyers, who Kan suggests are waiting for more inventory to become available on the market.
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In terms of mortgage types, the refinance share of activity experienced a two-basis-point uptick to 31.4%, while the share of adjustable-rate mortgages (ARMs) retracted slightly to 9.8%.
The shares of government loans from the FHA (14.7%) and the USDA (0.5%) remained unchanged, with a small increase observed in the VA share (10.5%) of total applications.
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