Mortgage application volumes up for first time in 4 weeks

Loan-application volumes saw their first rise in four weeks, as new economic data put a halt to recent steep interest rate surges, the Mortgage Bankers Association said.

The MBA's Market Composite Index, a measure of weekly application activity based on surveys of the trade group's members, increased a seasonally adjusted 2.5% for the seven-day period ending Nov 3. Compared to the same survey week in 2022, though, the index sat 17% lower.

"Applications for both purchase and refinance loans were up over the week but remained at low levels," said Joel Kan, MBA vice president and deputy chief economist, in a press release.

Borrowers returned as investors and the Federal Reserve offered some rate relief. Despite stronger-than-expected growth of U.S gross domestic product in the third quarter, the central bank opted not to hike the federal funds rate in its fight against inflation, taking a dovish tone, Kan noted. The U.S. Treasury's issuance update as well as the Census Bureau's jobs report also softened rate pressure. Between August and October, the 30-year conforming had grown by almost 70 basis points among MBA lenders. 

But the developments helped lead the average conforming fixed-rate mortgage down 25 basis points on a weekly basis to 7.61% from 7.86%. Borrowers typically used 0.69 worth of points to bring down the rate further for 80% loan-to-value ratio mortgages, decreasing from 0.73. 

At the same time, the fixed contract average of 30-year jumbo mortgages for balances higher than the conforming level of $726,200 in most markets similarly fell to 7.58%. A week earlier, the jumbo rate stood at 7.8%. Points decreased to 0.91 from 1.03.

With rates taking a fall, MBA's seasonally adjusted Purchase Index saw a 3% uptick but remained 20.7% below levels of a year ago, "as many homebuyers remain on the sidelines until more for-sale inventory becomes available," Kan said. Consumer purchasing power has taken a hit this fall due to the combination of interest rates and scarce housing supply, Fannie Mae researchers said this week.  

But the lack of affordability may have had some effect in tempering recent price growth. Purchase-loan sizes reported by the MBA have contracted over the past month with the average amount finishing at $405,200 last week, the smallest since January. 

The Refinance Index also inched up 1.6% compared to the prior weekly survey. On a year-over-year basis, though, volumes came in 6.9% lower, with a majority of homeowners already holding lower interest rates. But refi transactions nabbed a slightly larger share relative to total volume, increasing to 31.4% from 31.2%. 

Following elevated consumer interest over the past several weeks that coincided with the rate surge, ARM activity took a step back. Adjustable-rate mortgage volumes, which frequently swing in the same direction as fixed rates, fell 5.8% week over week, and their share shrunk to  9.8% of all applications compared to 10.7% seven days earlier. 

Compared to the larger downward movements across fixed rates, the 5/1 ARM average came in flat, edging down by a single basis to 6.76% from 6.77%. Points fell back to 0.80 from 1.46 for 80% LTV loans. 

Seasonally adjusted government-market volumes picked up at a faster pace than the composite index, particularly for loans sponsored by the Department of Veterans Affairs. The Government Index came in 3.7% higher from the prior week, mostly thanks to VA activity. 

VA-guaranteed loans grew to 10.5% share of total activity, increasing from 10.1% in the previous survey, while Federal Housing Administration-backed applications garnered the same 14.7% as it did a week earlier. Loans coming through the U.S. Department of Agriculture also took the same 0.5% portion as they did seven days earlier.

Fixed interest rates fell across the board, with the 30-year contract average for FHA-backed mortgages sliding down 21 basis points to 7.36% from 7.57%. Points for 80% LTV applications decreased to 0.91 from 1.03.

The contract average for 15-year fixed loans finished below the 7% mark, dropping 16 basis points to 6.98% week over week. Borrower points dropped to 0.88 from 1.22. In the prior survey, the 15-year average was 7.14%.