Borrowers seize their chance as rates drop
Mortgage applications increased slightly last week, fueled by a dip in interest rates that motivated borrowers to act, according to the Mortgage Bankers Association (MBA).
Home loan applications rose 1.9% on a seasonally adjusted basis from the previous week, spurred by a three-week decline in the 30-year fixed mortgage rate to 7.01% – the lowest in seven weeks. On an unadjusted basis, mortgage applications experienced a 1.1% rise.
“Rates coming down from recent highs spurred some borrowers to act, with increases across both conventional and government refinance applications,” said Joel Kan, vice president and deputy chief economist at MBA.
This uptick indicates a shift in borrower preferences towards fixed-rate mortgages and government-backed loans, likely due to the desire for stability and affordability in a volatile market.
The refinance index jumped 7% from the prior week and was 21% higher than the same week a year ago. VA refinances saw a double-digit increase for the third consecutive week, although current refinancing volumes remain well below historical averages.
On the purchase side, Kan noted: “Activity continues to lag despite this recent decline in rates, down 11% from a year ago, as potential buyers still face limited for-sale inventory and high list prices.”
The seasonally adjusted purchase index decreased 1% from the previous week, while the unadjusted purchase index decreased by 2% and was down 11% from the same week last year.
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The refinance share of total mortgage activity increased two basis points to 34% from the week before. The adjustable-rate mortgage (ARM) share dipped to 6.6%.
The FHA share of total applications saw a slight increase, rising to 12.8% from 12.4% the week prior. Similarly, the VA share of total applications increased to 13.7% from 12.7% the previous week, indicating a growing reliance on VA loans. The USDA share of total applications, however, decreased one basis point week over week to 0.3%.
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