Home buyers pushed mortgage volumes higher last week

Mortgage applications picked up last week thanks to elevated purchase activity, while refinances flattened, according to new data from the Mortgage Bankers Association.  

After dropping for the first time in a month at the end of March, the MBA's Market Composite Index, a measure of weekly mortgage activity based on surveys of the trade group's members, increased a seasonally adjusted 5.3% for the seven-day period ending April 7. But compared to the same week a year ago, the index was still 41.7% lower, as the mortgage industry continues to face a sluggish housing market and elevated interest rates. 

Home buying accounted for most of the uptick, with the seasonally adjusted Purchase Index surging 7.8% from the previous week, but volumes still remained 31.4% lower on a year-over-year basis.   

"Prospective home buyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week," said MBA Chief Economist Mike Fratantoni in a press release. The 30-year conforming rate among the association's lenders has now fallen for five consecutive surveys.

The Refinance Index saw virtually no change, though, increasing by just 0.1% from seven days earlier. But with most homeowners currently locked in at lower rates, refinance volume sits 56.9% under levels of 12 months ago. 

Conventional refinance applications slowed, but government-backed transactions made up for the decrease, the association said. Refinance volume relative to total activity also shrank to 27% from 28.6% one week earlier.

As with refinances, purchase activity coming through federal programs also rose on the week, helping lift the share of government-backed loans higher relative to total volume. Mortgages sponsored by the Federal Housing Administration accounted for 12.3% of applications, up from 12% the previous week, while the share insured by the Department of Veterans Affairs leaped to 12.8% from 11%. The slice of applications coming from U.S. Department of Agriculture programs decreased to 0.5% from 0.6% seven days earlier. 

But even with an increase in federally backed loans, which tend to skew toward more affordably priced properties, average amounts recorded on weekly applications came in higher across the board. The mean overall size went up 1.5%, climbing to $387,700 from $381,800 the prior week. 

The average refinance size increased 1.4% to $267,700 from $264,100. And after declining for two straight weeks, purchase-application amounts headed back up 0.9% to $431,900 from $428,000. 

Even as purchase volumes and demand diminish significantly in the past year, price relief is proving to be limited due to the scarce number of new listings coming on the market. Consumers are hesitant to give up low interest rates on their current homes to purchase a new property at double that rate, according to risk management and valuations data provider Veros Real Estate Solutions. After hovering at or below 3% for most of 2021, rates accelerated and have remained above 6% since September 2022. 

Buyers hoping for home prices to soften further this year may end up disappointed. "It appears that we have turned the corner from overall slight annual forecast depreciation one quarter ago to an overall flat forecast now," said Veros' Chief Economist Eric Fox in a published statement.  

But like peers at other companies, including Redfin and CoreLogic, the direction housing costs move will vary greatly by region, with the Western U.S. more susceptible to depreciation in home values over the next year.

Last week, mortgage volumes and amounts both picked up at the same time interest rates headed the other way across categories tracked in the MBA's survey. 

The contract rate for the 30-year conforming fixed-rate mortgage with balances below $726,200 dropped for the fifth week in a row to 6.3% from 6.4%. Points for 80% loan-to-value ratio loans also decreased to 0.55 from 0.59.

Average contract rates for 30-year jumbo products with balances above the conforming amount similarly decreased 10 basis points to 6.36% from 6.46% one week prior. Points fell to 0.42 from 0.47.

The 30-year average for FHA-backed mortgages slipped down 4 basis points to 6.29% from 6.33% seven days earlier, while points inched down to 0.91 from 0.92.

Meanwhile, the 15-year fixed-rate mortgage average took a steeper dive, decreasing 19 basis points to 5.78% from 5.97%. Points for 80% LTV loans increased to 0.57 from 0.54. 

The hybrid 5/1 adjustable-rate mortgage average dropped 10 basis points on a weekly basis, falling to 5.51% from 5.61%. Points decreased to 0.9 from 1.02. The loans carry a fixed rate for five years, before becoming variable. The share of ARM applications, which tend to garner more attention from borrowers when fixed interest rates rise, retreated downward as well to 6% of total volume, compared to 7.2% seven days earlier.