Mortgage apps dip as rate stability stalls momentum

Mortgage applications have swung up and down over the last two months as mortgage rates have stabilized, according to the Mortgage Bankers Association.

The MBA's Market Composite Index, a measure of mortgage loan application volume, decreased 3.8% on a seasonally-adjusted basis from one week prior for the week ending Dec. 12, as mortgage rates increased three basis points. The Index fell 5% on an unadjusted basis.

"Mortgage rates inched up last week following the [Federal Open Market Committee] meeting, as investors interpreted the comments to signal that we are near the end of this rate cutting cycle. As a result, mortgage applications declined slightly," said Mike Fratantoni, the MBA's chief economist, in a press release Wednesday.

The 30-year fixed rate mortgage hit 6.22% last week, according to Freddie Mac, after the FOMC lowered the federal funds rate by 25 basis points. Rates haven't moved much over the last month or so, currently sitting at the same level as the first week of November.

The Refinance Index declined 4% from the previous week, but was 86% higher than the same week a year ago. The Purchase Index dropped 3% on a seasonally-adjusted basis and 7% on an unadjusted basis compared with the previous week, but was up 13% from a year ago.

"Purchase application volume typically drops off quickly at the end of the year, and this shifts the mix of the business, with the refinance share reaching 59 percent last week, the highest level since September," Fratantoni said. "However, refinance activity has remained mostly the same for the past month as rates continue to hold at around the same narrow range."

Purchase activity surged late last month to its highest level since early 2023. But as is typical with this time of year, a drop in purchase applications boosted the refinance share of total applications to 59% from 58.2% the week prior. The adjustable-rate mortgage share of activity also increased to 7.2%.

Loans insured by the Federal Housing Administration had its share of total applications decrease to 19.5% from 20.2% the week prior. But loans backed by the Department of Veterans Affairs and U.S. Department of Agriculture saw their shares grow to 16.6% and 0.4% from 16.4% and 0.3%, respectively. 

Four of the five types of mortgages the MBA tracks saw an incline in interest rates last week compared with the week prior, including:

• 30-year fixed-rate mortgages with conforming loan balances, 6.38% from 6.33%;
• 30-year fixed-rate mortgages backed by the FHA, 6.12% from 6.08%;
• 15-year fixed-rate mortgages, 5.72% from 5.71%;
• and five-year ARMS, 5.63% from 5.51%.
  

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances decreased to 6.44% from 6.46%.