Borrowers seize chance to refi as mortgage rates ease
Mortgage application volumes ticked higher last week as mortgage rates continued to edge down, driven by an uptick in refinancing activity, according to data from the Mortgage Bankers Association (MBA).
The Market Composite Index, which measures mortgage loan application volume, rose 0.5% on a seasonally adjusted basis and 0.3% on an unadjusted basis compared to the prior week.
“Treasury yields continued to move lower last week, and mortgage rates declined for the second week in a row, with the 30-year fixed rate down 10 basis points to 7.08%, the lowest level since early April,” said Joel Kan, MBA’s deputy chief economist. “While the downward move in rates benefits prospective homebuyers, mortgage rates are still much higher than they were a year ago, while for-sale inventory remains tight.”
Refi boost
The lower rates provided a modest boost to refinance applications. The Refinance Index jumped 5% week-over-week and was 7% higher than the same period last year.
The refinance share of total mortgage activity increased to 32% from 30.6% the week before.
On the purchase side, applications dipped 2% from the previous week and were down 14% year over year as higher mortgage rates continue weighing on homebuyer demand.
“The decline in rates led to a small boost to refinance applications, including another strong week for VA loan refinances,” Kan said. “However, the overall level of refinance activity remains low.”
There was a split in government purchase applications, with FHA applications down 9% week over week, but VA applications have climbed to 12.7% of total activity from 11.7% previously.
New home purchase rebound
Despite the weekly drop in purchase applications, MBA’s Builder Application Survey (BAS) data for April showed that new home purchase applications surged 22.1% year over year and 2% from March.
“New home purchase activity increased at a healthy pace in April 2024 after a slight pause in March,” Kan explained. “There continues to be healthy demand for new homes, given greater availability and other benefits over existing home purchases such as builder concessions and customization options. First-time homebuyers account for a growing share of purchase applications, with the FHA share of applications at 26.3% in April, higher than the survey average of 18% dating back to 2013.”
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MBA estimated new single-family home sales ran at a seasonally adjusted 699,000-unit annual pace in April, the strongest in three months.
The mix of purchase applications showed conventional loans at 62.8%, FHA at 26.3%, VA at 10.5%, and USDA loans at 0.3%.
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