They react positively to rate reduction
The Mortgage Bankers Association reported a surge in mortgage applications for the week ending December 8, the trade association reported today.
MBA’s market composite index, which measures loan application volume, jumped 7.4% on a seasonally adjusted basis and 6% on an unadjusted basis from the previous week. Data suggests the upswing was spurred by a significant drop in mortgage rates and a slowing economy.
“Mortgage rates dropped last week, as incoming data point to a slowing economy and supports a pivot by the Federal Reserve to begin cutting rates next year,” MBA chief economist Mike Fratantoni said in the report. “The average 30-year fixed mortgage rate declined to 7.07%, the lowest since July. Borrowers who had seen rates near 8% earlier this fall are now seeing some lenders quote rates below 7%.”
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The refinance index reflected the uptick in overall applications, with a 19% week-over-week increase and a 27% year-over-year rise. The seasonally adjusted purchase index rose by 4%, although the unadjusted purchase index saw a slight decline of 1% from the previous week and was 18% lower than the corresponding week last year.
“Refinance volume picked up in response to this drop in rates, with a particularly notable increase for FHA and VA refinance applications,” Kan said. “Purchase volume was running about 18% below last year’s pace, as prospective homebuyers are still challenged by a lack of inventory, even if rates have decreased.”
Further breakdown of the data showed changes in the composition of mortgage activity. The refinance share of mortgage activity rose to 39.2% of total applications, up from 34.7% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 6.3% of total applications.
In terms of specific loan types, the FHA share of total applications increased to 16.1%, up from 15% in the preceding week. The VA share also increased, going up to 14.2% from 12.8%. Conversely, the USDA share of total applications experienced a slight decrease, moving from 0.5% to 0.4%.
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