The latest economic and policy trends facing mortgage servicers

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Mortgage applications up 2.8% amid jobs gains

FHA purchase applications rose 3.3%

Mortgage applications increased 2.8% for the week ending Aug. 6, and there are signs that at least some first-time homebuyers are finding opportunities despite high home prices.

Ten-year Treasury yields rose slightly at the end of last week after the July jobs report exceeded expectations. That was enough to drive mortgage rates up slightly to 2.99%, according to the latest report from the Mortgage Bankers Association. Rates have struggled to surpass 3% for most of this year.

“Mortgage applications rebounded last week, including an increase in purchase applications for the first time in nearly a month,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Rates slightly rose but remained below 3%, driven by an end-of-week increase in the 10-year Treasury yield following the positive July jobs report.”

Last Friday, the U.S. Labor Department announced 943,000 new jobs were added in July, exceeding the forecast of 865,000. It was the highest month-to-month growth since August of 2020.

With low rates and heightened concerns surrounding the Delta variant, many homeowners are electing to refinance. For the first time since February, refinance activity reached half of all mortgage originations, according to the latest report from Black Knight.

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“Homeowners continue to respond to lower rates, with refinance activity climbing to the highest level since February 2021,” said Kan. “The refinance share of loan counts was at 68%, compared to a 63.4% share for refinances by dollar volume, as purchase loans continue to see significantly higher loan sizes.”

Although home prices continue to rise, Kan said that a 3.3% increase in FHA purchase applications could mean that some homebuyers are finding opportunities to enter the housing market.

“With low for-sale inventory keeping home-price appreciation in many markets at record highs, the jump in FHA purchase applications is potentially a sign that more first-time buyers are finding purchase options despite the high prices,” Kan said.

The refinance share of mortgage activity grew slightly, to 68% of total applications from 67.6% the week prior. 

The FHA share of total applications was down one basis point to 8.9% from 9.0% the week prior, while the VA’s share of total applications declined to 9.6% from 9.9% the previous week, and the USDA’s share of applications held steady at .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) increased to 2.99% from 2.97%.
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.15% from 3.12%.
  • The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.06% from 3.08%.
  • The average contract interest rate for 15-year fixed-rate mortgages increased to 2.35% from 2.33%.
  • The average contract interest rate for 5/1 ARMs decreased to 2.52% from 2.93%.

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