With mortgage rates down nearly 50 basis points from the recent peak about a month ago, borrower demand picked up again this week, according to the Mortgage Bankers Association (MBA).
The market composite index, a measure of mortgage loan application volume, rose 2.2% for the week ending November 18 after registering a 2.7% increase in the previous week. Compared to the same week in 2021, however, the index fell 67.8%.
Purchase applications were up 2.76% this week, compared to the previous week, but 41% down year over year. Meanwhile, the demand for refinance index, which dropped 86.2% year over year, increased 1.5% from the prior week.
“The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
Mortgage rates, which were trending up with the Federal Reserve’s interest rate hike, started to fall following lower-than-expected consumer price growth in October. The consumer price index (CPI) rose by 7.7% year over year, marking the smallest 12-month increase since the year ending in January 2022.
MBA estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) fell to 6.67% from the previous week’s 6.90%. At its recent peak about a month ago, rates reached 7.16%.
Lenders continue to face tightening profit margins as mortgage rates stay substantially higher than they were last year. In light of this, HousingWire recently caught up with Teraverde’s Rob Peterson to learn more about what lenders need to succeed in today’s lending environment.
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Jumbo mortgage loans (greater than $647,200) this week also decreased to 6.30% from 6.51%, the MBA said.
The average contract interest rate for 5/1 ARMs increased from 5.73% to 5.78% in the same period, reducing borrowers’ appetite for the product. ARM applications fell 15% compared to the previous week and 16.6% in comparison with the same period in 2021.
“With the decline in rates, the ARM share of applications also decreased to 8.8% of loans last week, down from the range of 10% and 12% during the past two months,” according to Kan.
The report shows the share of refinancings increased from 27.6% to 28.4% of the total applications this week.
The Federal Housing Administration’s (FHA) share of total applications marginally decreased to 13.4% from 13.5% the week prior. The Veterans Affairs (V.A.) share of total applications fell to 10.5% from 10.6%, and the United States Department of Agriculture (USDA) share remained unchanged at 0.6%.
The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.