Refinances, especially in the government-sponsored loan market,
The MBA's Market Composite Index, a measure of mortgage application activity based on surveys of the trade group's members, jumped up a seasonally adjusted 7.4% for the weekly period ending Dec. 8. The rise in activity comes following a 2.8% uptick seven days earlier. But compared to the same survey period of 2022, the index was still 7.7% lower.
Increases in both purchases and refinances contributed to the elevated pace of activity, as falling mortgage rates brought borrowers to the table, said Mike Fratantoni, MBA senior vice president and chief economist.
"Borrowers who had seen rates near 8% earlier this fall are now seeing some lenders quote rates below 7%," he said in a press release. Recent incoming economic data pointed to a slowing economy that could bring them lower, but strong November jobs data released late last week
The overall average for 30-year fixed-rate mortgages with balances below conforming levels declined to 7.07%, the lowest since July, a 10 basis point fall from 7.17% week over week. Borrowers typically used 0.59 in points to bring down their rates for 80% loan-to-value ratio mortgages, just a notch below 0.6 a week earlier.
The 30-year jumbo average similarly fell 12 basis points to 7.22% from 7.35%. Points decreased to 0.37 from 0.44. The average rate dropped, as the MBA reported
Borrowers looking to refinance are noticeably responding to the downward direction of rates, Fratantoni noted. The Refinance Index leaped 19.4% after it recorded a surge of nearly 14% in the previous survey, climbing higher for the third consecutive week. The market saw elevated activity from both the conventional and government markets, with applications from the latter shooting up by 49.5%. Compared to a year ago, the index ended up 27.2% higher.
Refinances relative to total volume also expanded to a share of 39.2%, growing from 34.7% a week earlier. A 9% rise in the average refinance size led it to a value of $273,700, up from $251,000.
Meanwhile, the Purchase Index reversed course after sliding seven days earlier, climbing up by a seasonally adjusted 3.5%. But activity ran 18.1% lower from a year ago, as "prospective home buyers are still challenged by a lack of inventory, even if rates have decreased," Fratantoni said.
A week after falling below $400,000 to an 11-month low of $396,500, the mean amount of purchase-loan applications also rose, crossing back above that threshold to finish 2.9% higher at $407,900.
The combined increases in loan amounts for both refinances and purchases carried the overall average size up 2.7% to $355,400 from the prior week's $345,900, which was a 2023 low.
On the strength of the refinance market, the seasonally adjusted Government Index shot up 14.7% week over week, and the share of federally backed activity grew in tandem. Mortgages sponsored by the Federal Housing Administration nabbed 16.1% of volume, increasing from 15% in the previous survey, while Department of Veterans Affairs-guaranteed applications garnered 14.2%, up from 12.8%. The slice of activity coming out of
Alongside the downward movements for conforming and jumbo averages, interest rates at MBA lenders fell by at least 10 basis points from the prior survey across all other loan types tracked by the association. The fixed-contract rate of FHA-backed home loans fell to 6.84% from 6.98%, while borrower points decreased to 0.72 from 0.84 for 80% LTV loans.
Meanwhile, the 15-year fixed interest rate dipped 13 basis points to 6.67% from 6.8%, as borrower points dropped to 0.58 from 0.77.
The contract average of the 5/1 adjustable-rate mortgage, which starts fixed for a 60-month term, took an 11 basis point drop to 6.47% from 6.58%. But heading in the other direction from fixed-rate loans, points used by borrowers for the 5/1 ARM increased to 0.76 from 0.69.
The overall share of ARMs compared to overall activity was 6.3%, shrinking from 7.4%, as the fall of fixed rates leads to diminished borrower interest. In late October, adjustable-rate mortgages accounted for more than 10% of new loans, the highest share since 2022.
