Easing mortgage rates fail to boost purchase applications
Mortgage applications fell for the week ending July 19, even as refinancing activity increased due to lower interest rates, according to the latest data from the Mortgage Bankers Association (MBA).
The MBA’s Market Composite Index, which measures mortgage loan application volume, decreased 2.2% on a seasonally adjusted basis from the previous week. Unadjusted, the index fell 2%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased five basis points to 6.82%.
“Mortgage rates continued to ease, with the 30-year fixed rate dipping to 6.82%, the lowest level since February 2024,” said Joel Kan, vice president and deputy chief economist at MBA.
While overall applications declined, refinance applications increased 0.3% from the previous week and were 38% higher than the same week one year ago. The refinance share of mortgage activity rose to 39.7% of total applications from 38.8% the previous week.
“Refinance applications were up, driven by conventional and FHA application activity, as some borrowers took the opportunity to act,” Kan noted. “Furthermore, the conventional refi index was at its highest level since September 2022.”
While lower interest rates are providing some relief for potential refinancers, affordability concerns continue to dampen the purchase market. The combination of still-elevated interest rates and rising home prices is making it difficult for many prospective buyers to enter the market.
Read next: How can borrowers overcome mounting affordability hurdles?
The seasonally adjusted purchase index decreased 4% from one week earlier. The unadjusted purchase index also declined 4% compared with the previous week and was 15% lower than the same week one year ago.
Kan attributed the decline in purchase applications to ongoing affordability challenges: “Purchase applications decreased as ongoing affordability challenges persist with rates at their current levels and with home-price appreciation still strong in many markets.”
Other findings from the MBA survey include:
- The adjustable-rate mortgage (ARM) share of activity remained unchanged at 5.8% of total applications.
- The FHA share of total applications decreased one basis point to 13.4%.
- The VA share of total applications decreased four basis points to 14.8%.
- The USDA share of total applications remained unchanged at 0.4% from the week prior.
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