Mortgage activity flattens as buyers take wait-and-see approach

Mortgage application volumes saw a small uptick last week thanks to increased purchase interest, but buyers are likely holding off in expectation of more affordability to come, according to a leading industry trade group.

The Mortgage Bankers Association's Market Composite Index, a measure of weekly application volumes based on surveys of the group's members, edged up a seasonally adjusted 0.5% for the seven-day period ending Aug. 23. While mostly flat, the small rise represented the third increase in the past four weeks after a 10.1% fall in the previous survey. Compared to a year ago, volumes were 20% higher. 

Volumes finished higher as interest rates declined for another week. The contract fixed rate average among MBA members for 30-year conforming mortgages fell to 6.44% from 6.5% seven days earlier. Points used by borrowers to help buy down the rate also decreased to 0.54 from 0.6 for 80% loan-to-value ratio applications. 

"Rates have now come down more than 80 basis points from a year ago," said Joel Kan, MBA's vice president and deputy chief economist, in a press release. 

"Mortgage applications were slightly higher, driven by marginally stronger purchase activity. Refinance applications were essentially unchanged."

The seasonally adjusted Purchase Index climbed up 0.9% from the previous week and was also 9% higher than a year ago. 

Rising inventory has helped keep the surging pace of home prices in check, but they still remain unaffordable for many, several research groups have said. Real estate agents are reporting aspiring buyers are in the market but likely holding off until rates hit specific benchmarks. 

"As observed in recent weeks, despite lower rates, purchase applications have not moved much," Kan said. "Prospective homebuyers are staying patient now that rates are moving lower and for-sale inventory has started to increase."

Meanwhile, the Refinance Index flattened, slipping back 0.1% week over week. Still, the refinance market maintained its recent rebound that started as interest rates began trending downward, with last week's activity up by 85.2% from the same survey period a year ago. 

"Borrowers continue to act," Kan said. The refinance share relative to overall activity also expanded to 46.6% from 46.3% a week earlier. 

The Government Market Index, meanwhile, saw a similar marginal increase from the prior survey, rising 0.7%. As has been the case much of the summer, refinances backed by the Federal Housing Administration and Department of Veterans Affairs lifted overall volumes.

The overall share of FHA-sponsored purchases and refinance loans came in at 15.3%, falling back from 15.6% the previous week. VA-guaranteed loans garnered a 15.9% compared to 15.3%, while the small slice of applications from the Department of Veterans Affairs represented the same 0.4% of volume week over week. 

While the conforming rate decreased, the 30-year jumbo average finished higher from seven days earlier, jumping up 7 basis points to 6.75% from 6.68%. Points came in lower at 0.39, falling from 0.56 in the prior survey period. 

The fixed-rate average for 30-year contract FHA-backed loans took a 6 basis point drop to 6.36% from 6.42% the previous week. Borrower points edged down to 0.8 from 0.78 for 80% LTV-ratio loans. 

The 15-year fixed average ended the week 5.88% down 16 basis points from 6.04%, with points also falling to 0.68 from 0.71 one week earlier. 

The 5/1 adjustable-rate mortgage, which starts with a fixed 60-month term, averaged 5.98% compared to 6.25% in the previous survey. Points increased to 0.65 from 0.57. 

Adjustable-rate mortgage applications also made up a 5.5% share of all activity, the same as one week earlier.