Mortgage applications fell 4% for the week ending Dec. 10, large part because fewer borrowers are looking to refi their exiting mortgages, according to the Mortgage Bankers Association (MBA) survey published on Wednesday.
The decrease was mainly driven by the refi index falling 6.4% from the previous week on a seasonally adjusted basis. Concurrently, the purchase index increased 0.7% from the week prior.
Compared to a year ago, mortgage applications declined across the board. The overall market composite index dipped 30.9% on a seasonally adjusted basis. Refi apps fell 41.4% year over year, and purchase applications decreased 10.3% in the same period.
“Fewer homeowners have a strong incentive to refinance at current rates,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a statement.
The trade group estimates that the average contract 30-year fixed-rate mortgage for conforming loans ($548,250 or less) remained unchanged at 3.30%. For jumbo mortgage loans (greater than $548,250), rates decreased to 3.32% from 3.33% the week prior.
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Regarding the purchase market, Kan said mortgage applications increased slightly because a 1.7% rise in conventional applications offset a 1.6% decline in applications for government loans. Would-be homebuyers are finding it hard to compete with FHA and VA loans in a purchase market defined by low inventory. Sellers today are prioritizing cash offers and prospective buyers with conventional mortgage approval, particularly given that the Federal Housing Finance Agency just approved higher loan borrowing limits.
“The strength in conventional purchase activity continues to support higher loan balances, which moved back over $400,000. Housing demand remains strong as the year comes to an end amidst tight inventory and steep home-price growth,” Kan said.
Refinances represented 63.3% of total mortgage applications, down slightly from 63.9% the previous week. VA loans comprised 10.6%, decreasing one basis point. Meanwhile, FHA loans went from 9.9% to 9.6% in the period. The USDA share was at 0.5% of the total.