Mortgage applications in the US have risen for the second consecutive week as investors have fled to the safety of government-guaranteed securities following three bank failures and fears of depositor runs on large regional banks. A seasonally adjusted Market Composite Index released by the Mortgage Bankers Association (MBA) shows that loan application volume increased 6.3% for the week ended March 10th. Before adjustment, the index was up 7%.
A flight to safety in Treasury bonds caused Treasury yields to decline late last week, according to Joel Kan, MBA’s Vice President and Deputy Chief Economist. The 30-year fixed-rate decreased to 6.71 percent as a result of this decline in mortgage rates across all loan types. While lower rates should boost housing demand, the volatility in the financial market may cause buyers to delay their purchases.
Despite a 5% increase over the previous week, the Refinance Index was 74% lower than the same week last year. Compared to the previous week’s 28.9%, refinancing accounted for 28.2% of total applications. Kan stated that, while refinance activity was still well below that of a year earlier when it held a 48% market share and rates are still more than 2 points higher, the dip did bring some borrowers back, as evidenced by the 5% increase in refinance applications last week.
The seasonally adjusted Purchase Index rose by 7% week-over-week and was up 8% on a non-adjusted basis. However, it was 38% lower on an annual basis. Despite the increase in purchase applications, Kan added that the pace remained almost 40% below last year’s levels.
In summary, the recent dip in mortgage rates led to an increase in both purchase and refinance applications. While this is positive news, the uncertainty surrounding the broader economic environment and financial market volatility could still impact housing demand in the future.