Mortgage applications rise 3.4% as borrowing costs ease to 7.37%

Article Summary

Mortgage rates fell for a second straight week, with the 30-year fixed rate dropping to 7.37%, the lowest level in three weeks. That decline offered some relief to borrowers and helped applications edge higher, especially for conventional loans, according to Joel Kan, CMB, MBA’s vice president and deputy chief economist. He noted that rates remain more than a percentage point above where they were a year earlier, while many homeowners still hold mortgages at much lower rates than those available now. Kan also said the ARM share of applications climbed to 11.3%, the highest in more than a year, as more borrowers turned to adjustable-rate loans in an effort to reduce monthly payments.

Kan said purchase applications increased during the week but were still 18% below last year’s level, as many buyers continue to delay home purchases. Refinancing activity was also more than 60% lower than a year earlier because most borrowers have little financial benefit from refinancing.

The refinance share of mortgage activity slipped to 38.9% of total applications from 39% the previous week, while the adjustable-rate mortgage share rose to 11.3%.

The Federal Housing Administration (FHA) accounted for 16.6% of total applications, up from 16.3% a week earlier. The U.S. Department of Veterans Affairs (VA) share fell to 11% from 11.5%, while the U.S. Department of Agriculture (USDA) share held steady at 0.5%.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances of $832,750 or less declined to 7.37% from 7.41%. For 30-year fixed-rate mortgages with jumbo loan balances above $832,750, the average rate fell to 7.28% from 7.33%.

Rates also eased in other categories. The average contract rate for 30-year fixed-rate FHA-backed mortgages decreased to 7.12% from 7.13%, while the 15-year fixed-rate mortgage rate slipped to 6.7% from 6.73%. The average contract rate for 5/1 ARMs dropped to 6.41% from 6.46%.

Xactus Mortgage Intent Index

Xactus’ Mortgage Intent Index, which measures aggregated and anonymized credit-pull activity across the Xactus Intelligent Verification Platform, rose to 99.6.

“Mortgage intent rebounded approximately 2.8% week over week,” said Thomas Lloyd, chief strategy officer at Xactus. He added that the index remains more than 20% below the same week a year earlier, matching the year-over-year declines seen in each of the previous two non-holiday-affected weeks.

Lloyd said the modest improvement followed a holiday-affected stretch, with the Columbus Day holiday contributing to the prior week’s decline.

He added that while the weekly gain provides a small lift, mortgage intent remains well below year-ago levels, showing that underlying demand has not yet regained meaningful momentum.