Homebuyers take the waiting approach despite falling mortgage rates
Despite a slight decline in mortgage rates, mortgage applications have barely budged as prospective homebuyers remain patient.
The latest data from the Mortgage Bankers Association (MBA) showed that mortgage application volume increased by 0.5% compared to the previous week.
MBA vice president and deputy chief economist Joel Kan reported that mortgage rates declined for the fourth consecutive week, with the average 30-year fixed mortgage rate now at 6.44%.
“Rates have now come down more than 80 basis points from a year ago,” Kan said in the report.
Despite these lower rates, the response in mortgage applications has been muted. MBA’s Market Composite Index, which tracks mortgage applications, rose slightly on a seasonally adjusted basis but actually fell by 1% on an unadjusted basis compared to the previous week.
Refinancing activity showed little change, with the refinance index decreasing by 0.1% from the previous week. However, it remains 85% higher than the same week one year ago. The refinance share of mortgage activity increased slightly to 46.6% of total applications from 46.3% the previous week.
Purchase applications posted an uptick of 1% from the previous week. However, it was 9% lower than the same week one year ago on an unadjusted basis.
“Mortgage applications were slightly higher, driven by marginally stronger purchase activity,” Kan said. “Refinance applications were essentially unchanged but are still 85% higher than last year as borrowers continue to act – particularly FHA and VA borrowers. As observed in recent weeks, despite lower rates, purchase applications have not moved much. Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase.”
Read more: Locked-in mortgages complicate Fed's rate hike strategy
The survey also revealed changes in government loan applications. The FHA share of total applications decreased to 15.3% from 15.6%, while the VA share increased to 15.9% from 15.3%. The USDA share remained unchanged at 0.4%.
In terms of loan types, the adjustable-rate mortgage (ARM) share of activity held steady at 5.5% of total applications.
Overall, while mortgage rates continue to decline, the impact on mortgage application activity remains minimal, with many potential buyers choosing to wait for further rate drops and increased housing inventory before making their move.
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