What has prompted such a decline?
![Mortgage applications drop in the double digits](https://cdn-res.keymedia.com/cdn-cgi/image/w=1000,h=600,f=auto/https://cdn-res.keymedia.com/cms/images/us/073/0311_638598433805120884.jpg)
Mortgage applications fell by 10.1% for the week ending August 16, 2024, according to the Mortgage Bankers Association (MBA) Weekly Applications Survey. The Market Composite Index, a gauge of mortgage loan application volume, highlighted the significant decrease on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, the index dropped 11%.
The refinance index saw a notable decline of 15% from the previous week but remained 90% higher compared to the same week last year. Despite the 30-year fixed mortgage rate decreasing to 6.5%—the lowest since May 2023—refinance applications dropped.
Joel Kan, MBA’s vice president and deputy chief economist, attributed the reduction to a stabilization in both mortgage rates and application volumes after recent financial market fluctuations.
“Applications were lower last week, led by a 15% decrease in refinance activity despite the 30-year fixed mortgage rate declining for the third consecutive week,” Kan said. He noted that refinance applications, though lower, were 23% higher than a month ago, and recent weeks have shown the strongest readings since 2022. FHA refinance applications, however, increased for the sixth consecutive week.
Shift in borrowing activity
The purchase index also declined, falling 5% on a seasonally adjusted basis and 7% on an unadjusted basis from the prior week. This drop led to the lowest level of purchase applications since February 2024. Kan highlighted that even with lower mortgage rates, potential buyers are more selective due to increased inventory.
The refinance share of mortgage activity decreased to 46.3% of total applications from 48.6% the previous week. The adjustable-rate mortgage (ARM) share of activity fell to 5.5% of total applications. Conversely, the FHA share of total applications rose to 15.6%, while the VA share decreased to 15.3%. The USDA share increased slightly to 0.4%.
Average contract interest rates for various mortgage types saw mixed changes. For 30-year fixed-rate mortgages with conforming loan balances, the rate decreased to 6.50% from 6.54%. The rate for jumbo loan balances dropped to 6.68% from 6.78%. FHA-backed 30-year fixed-rate mortgages saw a decrease to 6.42% from 6.49%. Conversely, the average contract rate for 15-year fixed-rate mortgages increased to 6.04% from 5.96%, and 5/1 ARMs rose to 6.25% from 6.04%.
The MBA’s Weekly Applications Survey covers over 75% of all US retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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