During the week ending March 24, the Mortgage Bankers Association (MBA) reported an increase in both home purchase and refinancing applications for the fourth consecutive time. According to MBA’s Market Composite Index, which measures application volume, there was a 2.9 percent increase on a seasonally adjusted basis and a 3.0 percent increase on an unadjusted basis compared to the previous week, which ended on March 17.
Compared to the previous week, the Refinance Index showed a 5 percent increase, resulting in a higher refinance share of activity, which rose from 28.6 percent to 29.1 percent of total applications. However, when compared to the same week in 2022, the Index was significantly lower, showing a 61 percent decrease.
Both the adjusted and unadjusted Purchase Index showed a 2.0 percent increase compared to the previous week. However, when compared to the same week in the previous year, the unadjusted Purchase Index showed a significant 35 percent decrease.
According to Joel Kan, the MBA’s Vice President and Deputy Chief Economist, the third consecutive weekly decline in mortgage rates has led to an increase in application activity. The 30-year fixed rate, which fell to 6.45 percent, the lowest in over a month, has prompted homebuyers to respond, resulting in a fourth consecutive weekly increase in purchase applications. Although the 30-year fixed rate is still 1.65 percentage points higher than a year ago, the slowing of home price growth in many regions has helped to improve buyers’ purchasing power. Despite purchase applications being over 30 percent behind last year’s pace, the recent surge, along with other data indicating an increase in home sales, is a positive development.
The weekly variation in loan sizes, which is reflected in home prices, showed a more significant change than usual. The average loan size fell by over $5,000 to $384,300, with the average purchase loan declining by $7,200 to $430,500. When compared to the average purchase loan size of $452,900 during the same week in 2022, this decline seems to provide additional support for Joel Kan’s argument.
Furthermore, Joel Kan mentioned that there was an increase in refinance activity last week, although it remains significantly below last year’s pace by 61 percent. He explained that most homeowners still have rates that are much lower than current levels, which means that only a limited number of borrowers have the incentive to refinance.