Mortgage application volume rises to highest level in 6 weeks

Mortgage activity picked up for a third straight week, with growth observed among first-time buyers, the Mortgage Bankers Association said

The MBA's Market Composite Index, a measure of weekly application volumes based on surveys of trade groups members, climbed up a seasonally adjusted 3% for the seven-day period ending Nov. 17. The latest increase comes after similar rises of 2.8% and 2.5% earlier this month. Despite the recent upswing, applications still were 16.3% lower compared to the same week in 2022. 

"Mortgage applications increased to their highest level in six weeks, but remain at very low levels," said Joel Kan, MBA vice president and deputy chief economist, in a press release. 

Applications have headed upward over the past few weeks as interest rates began easing. A better-than-expected October inflation report alleviated some economic angst, with data pointing to a softening economy, according to Kan.

Following the release of the inflation report, the 30-year fixed conforming average among MBA lenders finished last week at 7.41%, taking a 20 basis point dive compared to 7.61% in the previous survey. Points used by borrowers to pay down the interest rate dropped to 0.62 from 0.67 for 80% loan-to-value ratio applications.

The effect of lower rates contributed to a seasonally adjusted 3.9% jump in the Purchase Index week over week, with both conventional and government volumes increasing. But with limited inventory still suppressing demand, activity remained 20.6% below year-ago levels. 

Still, recent trends show glimmers of potential momentum in the home buying market. Pending sales over the past month based off of Redfin's analysis of listings rose to its highest point in almost a year. Existing-home sales also ticked up on a monthly basis in October, according to the National Association of Realtors, despite remaining at historical lows.

Much of the recent growth is driven by first-time buyers, according to the MBA. "The average loan size on a purchase application was $403,600, the lowest since January 2023. This is consistent with other sources of home sales data showing a gradually increasing first-time home buyer share," Kan said. 

Purchase loans guaranteed by the Federal Housing Administration, which are frequently used for starter homes, surged a seasonally adjusted 6.7%.

The MBA's reported mean purchase amount declined 0.7% from the prior week's $406,600, and with the exception of 2023's first application survey, has remained above the $400,000 mark all year. The average refinance-application size also clocked in at its lowest this year, inching down 2.3% to $241,200 from $247,000 a week earlier. The overall average across all applications, likewise, fell to its lowest mark since January, finishing at $351,000, 1.3% lower from $355,700 seven days earlier. 

Meanwhile, the MBA's Refinance Index edged up 1.6% but sat 3.7% lower on an annual basis. The share of refinances relative to total activity grew to 32.4% from 31.9% the previous week. 

Led by growth in FHA-backed purchases last week, the share of government-market lending grew correspondingly. Loans guaranteed by the FHA garnered 14.8% of all applications compared to 14.4% a week earlier. The volume of mortgages taken through the Department of Veterans Affairs saw a more muted increase, inching up to 11.3% of activity from 11.2%. Applications sponsored by the U.S. Department of Agriculture pulled back to a 0.4% share from 0.5% the week prior.

Similar to the conforming 30-year rate, all other fixed averages tracked by the MBA decreased last week. The contract rate of the 30-year jumbo loan dropped 14 basis points to 7.51% from 7.65% in the previous survey. Borrower points decreased to 0.62 from 0.67.

The contract average of the 30-year FHA-guaranteed mortgage saw a 17 basis point decline, descending to 7.19% from 7.36% week over week. Points also dropped down to 0.69 from 0.75 for 80% LTV-ratio loans.

The 15-year fixed-rate mortgage averaged 6.89% compared to 6.94% seven days earlier, while points used decreased to 0.76 from one in the prior survey period.

The 30-year fixed-contract 5/1 adjustable-rate mortgage recorded the only rise in the survey, jumping 11 basis points to an average of 6.76% from 6.65%. Points also increased to 0.82 from 0.72. 

But as borrowers received some affordability relief thanks to the pullback in fixed rates over the past month, the share of ARMs shrank again to 8.3% of activity from 8.8%. Interest in ARMs typically rise and fall alongside fixed-rate movements. Four weeks ago, adjustable-rate mortgages approached 11% of volume.