Mortgage applications dip, but low rates keep buyer demand strong

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Mortgage applications decreased 0.6% from one week earlier, although a slight drop in purchase volume belied the fact that consumers are taking advantage of the current rate environment, according to the Mortgage Bankers Association.

The MBA's Weekly Mortgage Applications Survey for the week ending Oct. 16 found that the seasonally adjusted and unadjusted purchase indices both decreased 2% from the previous week, although it was 26% higher than the same week one year ago.

"Homebuyer demand remains strong this fall, but purchase applications did decrease with both conventional and government purchase activity taking a step back," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "Given the ongoing housing market recovery and low rate environment, both purchase and refinance applications remained robust compared to a year ago."

Meanwhile, the refinance index increased 0.2% from the previous week and was 74% higher than the same week one year ago. The refinance share of mortgage activity increased to 66.1% of total applications from 65.6% the previous week.

"Mortgage rates increased last week, with the 30-year fixed rate climbing 2 basis points to 3.02%, the highest since late September. Despite the uptick in rates, refinance activity held steady, with FHA refinance applications posting a 17.6% increase, helping to offset declines in the other loan types," Kan said.

Adjustable-rate mortgage activity decreased to 1.9% from 2% of total applications, while the share of Federal Housing Administration-insured loan applications increased to 11.8% from 10.7% the week prior.

The share of applications for Veterans Affairs-guaranteed loans decreased to 12.6% from 13.4% and the U.S. Department of Agriculture/Rural Development share decreased to 0.5% from 0.6% the week prior.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased 2 basis points to 3.02%. For 30-year fixed-rate mortgages with jumbo loan balances (greater than $510,400), the average contract rate increased 3 basis points to 3.33%.

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 3.12%. For 15-year fixed-rate mortgages, the average increased 2 basis points to 2.61%. The average contract interest rate for 5/1 ARMs increased to 2.86% from 2.63%.

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Mortgage applications Purchase Refinance Mortgage rates Originations Mortgage Bankers Association FHA The VA