Refinancing rebounds but some applications still lag
Mortgage applications rebounded by 3.9% after two weeks of declining application activity, according to the latest survey by the Mortgage Bankers Association (MBA).
MBA’s Market Composite Index, which tracks the volume of mortgage applications, saw a 3.9% rise on a seasonally adjusted basis. Unadjusted, the index jumped by 30% compared to the previous week.
The uptick was driven by long-term mortgage rates dropping to their lowest point since March, offering much-needed relief in a tight market. The average interest rate for 30-year fixed-rate mortgages with conforming loan balances fell 13 basis points to 6.87%.
“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower,” said Joel Kan, vice president and deputy chief economist at MBA.
Refinancing activity played a crucial role in the increase, with the refinance index rising 15% from the prior week and 37% from the same week last year.
Despite the overall increase in applications, the seasonally adjusted purchase index dipped by 3% from the previous week. However, on an unadjusted basis, purchase apps increased by 22% from the last week but were still 14% lower than the same week a year ago.
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“Application activity was up 4%, driven by a 15% jump in refinances to the highest level since August 2022,” Kan noted.
Refinance applications now make up 38.8% of total mortgage activity, up from 34.9% the previous week. The share of adjustable-rate mortgage (ARM) applications decreased to 5.8%. There was also an increase in the FHA and VA shares of total applications, which rose to 13.5% and 15.2%, respectively, while the USDA share held steady at 0.4%.
“While FHA and VA refinance applications accounted for a significant share of the increase, these are likely recently originated loans with even higher than current offered rates,” Kan added. “Even with last week’s rate decline, purchase applications continue to lag, down 14% compared to last year’s pace.”
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