Positive Trends in Mortgage Applications Activity
Mortgage applications have shown a promising increase, rising by 2.3 percent compared to the previous week, according to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey. The data covers the week ending August 25, 2023.
The Market Composite Index, a reliable measure of mortgage loan application volume, reflects this 2.3 percent increase on a seasonally adjusted basis from the previous week. When considering the data on an unadjusted basis, the index still showcases a notable 1 percent increase compared to the prior week.
Mixed Results in Purchase and Refinance Activity
Breaking down the data further, the Refinance Index demonstrated a 3 percent increase from the prior week but remained 28 percent lower than the same week the previous year. Meanwhile, the seasonally adjusted Purchase Index increased by 2 percent when compared to one week earlier. However, the unadjusted Purchase Index decreased by 0.3 percent compared to the prior week and showed a significant year-over-year decline of 27 percent.
Analysis by Joel Kan, MBA’s Vice President and Deputy Chief Economist
Joel Kan, MBA’s Vice President and Deputy Chief Economist, provided insights into the data, saying, “Mortgage rates were mostly unchanged last week, with the 30-year fixed rate remaining at 7.31 percent – the highest since December 2000. Treasury yields peaked early in the week and did move lower by the end, which may have spurred some activity.”
Challenges in the Housing Market Persist
Kan also noted that while mortgage applications for both home purchases and refinances increased for the first time in five weeks, they remained at relatively low levels. In particular, purchase applications increased but were still 27 percent lower than a year ago. This decline is attributed to the impact of elevated mortgage rates and the persistent challenge of tight housing inventory, which continues to weigh on home-buying activity.
Refinance Market Dynamics
Kan observed, “The refinance market continues to be slow despite last week’s gain, which was driven by a 7.9 percent spike in conventional refinances. Government refinance applications dropped more than 10 percent last week.”
Market Share Changes
In terms of market share, the refinance activity increased to 30.1 percent of total applications, slightly up from 29.5 percent the previous week. However, the adjustable-rate mortgage (ARM) share of activity decreased slightly to 7.5 percent of total applications.
Share Changes Among Loan Types
Among different loan types, the FHA share of total applications decreased to 13.2 percent from 14.3 percent the previous week. The VA share of total applications remained unchanged at 11.6 percent from the week prior, while the USDA share of total applications decreased slightly to 0.4 percent from 0.5 percent in the previous week.
Interest Rate Trends
Interest rate trends also played a significant role in the data. For instance, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained unchanged at 7.31 percent. However, points decreased slightly to 0.73 from 0.78, including the origination fee, for 80 percent loan-to-value ratio (LTV) loans.
Further Interest Rate Insights
For 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200), the average contract interest rate increased slightly to 7.28 percent from 7.27 percent. Points decreased to 0.66 from 0.84, including the origination fee, for 80 percent LTV loans.
Interest Rates for FHA-backed Mortgages
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased slightly to 7.10 percent from 7.09 percent. Points decreased to 1.09 from 1.20, including the origination fee, for 80 percent LTV loans.
Steady Rates for 15-Year Fixed-Rate Mortgages
Meanwhile, for 15-year fixed-rate mortgages, the average contract interest rate remained unchanged at 6.72 percent. Points increased slightly to 1.11 from 1.06, including the origination fee, for 80 percent LTV loans.
Rates for 5/1 ARMs
The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) decreased slightly to 6.48 percent from 6.50 percent. Points increased to 1.20 from 1.03, including the origination fee, for 80 percent LTV loans.
