Lower Rates Boost Mortgage Application Volume

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Lower Rates Boost Mortgage Application Volume

Jun 23, 2023 | News | 0 comments

There was a significant rise in mortgage applications, which is the first increase since May 5. This surge can be attributed to lower interest rates and the usual boost observed after a holiday week. The Mortgage Bankers Association (MBA) announced a 7.2 percent growth in its Market Composite Index, adjusted for seasonal factors, compared to the previous week. Without adjustments, the index saw a remarkable 18 percent jump.

The Refinance Index experienced a 6.0 percent increase compared to the previous week, but it was 41.0 percent lower compared to the same week last year. The proportion of refinance applications remained the same, accounting for 27.3 percent of the total applications, similar to the previous week.

The Purchase Index saw a seasonally adjusted increase of 8.0 percent and a 17.0 percent increase before adjustment. However, it was 27.0 percent lower compared to the same week in 2022.

According to Joel Kan, Vice President and Deputy Chief Economist of the MBA, mortgage rates have decreased for the second consecutive week, with the 30-year fixed rate now at 6.77 percent. Although mortgage applications increased compared to the previous week, they remain significantly lower than the levels seen a year ago. The current rates, which are still more than one percentage point higher than last year’s rates, coupled with a limited inventory of homes for sale, continue to hinder homebuying activity in many markets. Additionally, the average loan size for purchase loans has decreased for the third consecutive week, indicating a growing presence of first-time homebuyers in the market.

Kan mentioned that refinance applications were less than 33% of total applications and over 40% lower than last year. The increased rates have diminished the advantages of rate/term refinancing for numerous borrowers and have also discouraged cash-out refinancing, as borrowers are unwilling to let go of their lower rates.”

The 5/1 adjustable-rate mortgage (ARM) had a starter rate averaging 5.90 percent with 1.17 points. In the previous week, the rate stood at 5.93 percent, accompanied by 0.96 points. The share of activity for adjustable-rate mortgages (ARMs) declined from 6.8 percent to 6.5 percent of total applications.