MortgageMortgage Rates

Mortgage applications jump as rates plummet

Home prices, however, are depressing the purchase market

Mortgage applications increased 5.7% for the week ending July 23, mostly on the back of fast-falling mortgage rates.

The 10-year Treasury yield went into free fall last week, as investors grew concerned about the rise in COVID-19 variant cases and the potential economic fallout, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.

That led to the 30-year fixed mortgage rate declining to its lowest level since February of this year, according to the latest report from the Mortgage Bankers Association. And the 15-year rate fell to a record low last seen in 1990. Those ultra-low rates naturally resulted in a sharp uptick in refinancing activity.

“With over 95% of refinance applications for fixed rate mortgages, borrowers are looking to secure a lower rate for the life of their loan,” Kan said Wednesday.

Kan noted that the low rates didn’t spur the purchase market, which hasn’t been able to overcome record home prices. The purchase index decreased for the second week in a row to its lowest level since May 2020. It’s now fallen on an annual basis for the past three months.

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Kan noted that the Federal Housing Finance Agency reported that May home prices were 18% higher than a year ago.

“That continues a seven-month trend of unprecedented home-price growth,” he said. “Potential buyers continue to be put off by extremely high home prices and increased competition.”

The refinance share of activity of total mortgage applications increased to 67.2% from 64.9% the previous week. On an unadjusted basis, the market composite index increased 6% compared with the previous week. The seasonally adjusted purchase index decreased as well, down 2% from the previous week.

The FHA share of total mortgage applications decreased to 9.1% from 9.6% the week prior, and the VA share of total mortgage applications decreased to 9.8% from 10.5%.

Here is a more detailed breakdown of this week’s mortgage applications data:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.01% from 3.11%
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.11% from 3.13%
  • The average contract interest rate for 30-year fixed-rate mortgages decreased to 3.03% from 3.08%
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.36%, the lowest level in the history of the survey, from 2.46%
  • The average contract interest rate for 5/1 ARMs increased to 2.81% from 2.74%, with points unchanged at 0.30 (including the origination fee) for 80% LTV loans

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