Average Rates Mostly Steady Last Week

Mortgage Applications Decline

Mortgage applications decreased by 5.2% from the previous week, as reported by the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending May 31, 2024. This week’s results included an adjustment for the Memorial Day holiday, affecting the overall mortgage loan application volume. On an unadjusted basis, the Index saw a more significant drop of 16%. The Refinance Index also decreased by 7% from the previous week but was 5% higher than the same week last year. Similarly, the seasonally adjusted Purchase Index decreased by 4%, while the unadjusted Purchase Index fell 16% compared to the previous week and was 13% lower than the same week a year ago.

Mortgage Rates and Economic Impact

“Mortgage rates moved slightly higher last week, with the 30-year conforming rate reaching 7.07% – its highest level since early May – despite incoming data indicating somewhat slower economic growth,” said Mike Fratantoni, MBA’s SVP and Chief Economist. He added, “After adjusting for the Memorial Day holiday, both purchase and refinance application volumes were down, with purchase activity specifically 13% below last year’s level.”

Fratantoni also noted the relatively better performance in government purchase volume, attributed to growth in VA applications. “The market is relying on first-time homebuyer demand, and many first-time buyers do use government lending programs,” he explained.

Mortgage Activity Breakdown

  • Refinances: The refinance share of mortgage activity saw a slight decrease, falling to 31.1% of total applications from 31.3% the previous week. Conversely, the adjustable-rate mortgage (ARM) share of activity increased to 6.7% of total applications.

  • FHA Loans: The share of total applications increased to 13.2% from 12.7% the previous week.

  • VA Loans: The share of total applications rose to 12.1% from 12.0% the previous week.

  • USDA Loans: The share of total applications decreased to 0.3% from 0.4% the previous week.

Changes in Average Contract Interest Rates

  • 30-Year Conforming Mortgages: The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 7.07% from 7.05%, with points rising to 0.65 from 0.63 (including the origination fee). The effective rate also increased.

  • Jumbo Loans: For mortgages with loan balances greater than $766,550, the average contract interest rate slightly decreased to 7.21% from 7.22%, with points decreasing to 0.41 from 0.43 (including the origination fee), resulting in a lower effective rate.

  • FHA-backed Mortgages: The average contract interest rate increased to 6.87% from 6.85%, with points rising to 0.96 from 0.95, leading to a higher effective rate.

  • 15-year Fixed-rate Mortgages: The average contract interest rate rose to 6.75% from 6.66%, with points decreasing to 0.63 from 0.69. The effective rate increased.

  • 5/1 ARMs: The average contract interest rate decreased to 6.37% from 6.64%, with points falling to 0.63 from 0.77, resulting in a lower effective rate.

Wrapping Up

The latest data from the MBA highlights a significant decrease in mortgage applications amid rising interest rates. Despite the slight increase in government purchase volumes, the overall trend points to a challenging market for potential homebuyers, particularly first-time buyers. As mortgage rates continue to fluctuate, staying informed about these trends will be essential for both buyers and lenders navigating the current economic landscape.

(Source: mba.org)

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