The Mortgage Bankers Association's seasonally adjusted index showed that total mortgage application volume dropped 5.3% last week from the previous week. MBA economist Joel Kan said mortgage rates declined for the first time in over two months. Kan said lower rates failed to increase application activity, with applications for both purchases and refinancing continuing to fall.
The average contract rate on conforming 30-year fixed-rate mortgages fell to 7.41% last week from 7.50%. The conforming loan limit was $832,750. Points, including the origination fee, fell to 0.75 from 0.83 for loans carrying a 20% down payment.
Refinancing applications declined 2% from the previous week, a smaller decrease than in some earlier weeks when rates were rising. Refinancing demand stood 59% below the same week a year earlier. Refinancing applications are particularly sensitive to weekly rate changes. Rates are now more than a full percentage point above year-earlier levels, leaving very few borrowers who could benefit from refinancing.
Applications for home purchases fell 7% during the week and were 18% below year-earlier levels. Buyers are responding more to the overall level of rates than to weekly changes. The National Association of Realtors released a report Wednesday showing that pending home sales fell sharply in September. Pending sales measure signed contracts, capturing the immediate effect of rising rates during September. Rates stayed at that elevated level in October.
A persistently high share of buyers are choosing adjustable-rate mortgages, which offer lower initial rates. Adjustable-rate mortgages are considered riskier because rates eventually reset to market levels at the end of the term. Kan said the adjustable-rate mortgage share remained unchanged at 10.5%. Kan said adjustable rates remained almost a full percentage point below the 30-year fixed rate, offering qualified buyers a lower-rate option.
A separate Mortgage News Daily survey showed little movement in mortgage rates at the start of this week. Multiple monthly inflation reports made last week particularly volatile for rates. Rate movements this week have appeared to track oil prices. However, Mortgage News Daily Chief Operating Officer Matthew Graham warned against giving that relationship too much weight because the correlation has been highly unreliable for more than a month.
Mortgage Rates Drop for First Time in 2 Months, Applications Continue to Fall
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Summary
Interest rates for 30-year fixed-rate mortgages fell to 7.41%, marking the first drop in two months, but mortgage applications still declined 5.3% weekly, according to the Mortgage Bankers Association. Funding rates failed to spark demand, with purchase and refinance applications both falling. Refinancing activity was 59% lower than the same week last year, while home purchase applications dropped 18%. Adjustable-rate mortgages held at 10.5% of the market, offering lower initial rates but higher long-term risk.
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