Mortgage applications rose due to year-over-year progress in the job market, snapping a two-week skid. It was a 2.5% increase from the week prior, according to the Mortgage Bankers Association.
The purchase application volume drove the overall numbers. The seasonally adjusted purchase index increased by 7% from one week earlier, however, it decreased by 15% on an unadjusted basis. It stands at 8% higher year-over-year.
Despite the total applications rising, the refinance index decreased 4% for the week ending July 6 from the previous week. That is the lowest level of activity since December 2000. The refinance share of application activity went to 34.8% from 37.2%, the lowest since August 2008.
"The strong job market continues to bolster demand for homes, with purchase volume up 8% year-over-year, even as the lack of inventory still is holding back the pace of sales. Nevertheless, the mix of business continues to move towards loans for home purchase," said MBA Chief Economist Mike Fratantoni.
Employers added 213,000 jobs in June, while the unemployment rate also increased to 4% as more unemployed people resumed looking for jobs. If hiring increases continue, that could translate to more house hunters in the real estate market.
Adjustable-rate loan activity decreased to 6.3% from 6.7% of total applications.
The share of applications for Federal Housing Administration-guaranteed loans decreased to 10% from 10.2%, Veterans Affairs-guaranteed loans jumped to 11.3% from 10.7% and U.S. Department of Agriculture/Rural Development remained unchanged at 0.8%.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.76% from 4.79%. The average for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) also dropped, going to 4.68% from 4.71%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 4.80% from 4.78%. The average for 15-year fixed-rate mortgages dipped to 4.18% from 4.22%.
The average contract interest rate for 5/1 ARMs reached its historical high point of 4.13%, gaining 10 basis points from last week. The MBA began tracking 5/1 ARMs interest rates in January 2011.