How applications moved during the Fed's rate cut

Good times in the refinance market continue to roll. 

Mortgage applications for the week ending Sept. 20 rose to their highest level since July 2022, the Mortgage Bankers Association said Wednesday. As mortgage rates fade, the association's Refinance Index jumped 20% weekly and was up 175% from the same time last year. 

"While the level of refinance activity is still modest compared to prior refi waves, they now account for the majority of applications, given the seasonal slowdown in purchase activity," said Joel Kan, vice president and deputy chief economist at the MBA, in a press release. 

On the whole, the MBA's Market Composite Index measure of applications climbed 11% from the week ending Sept. 13.

The Federal Open Market Committee's first rate cut in four years last week was already baked into declining mortgage rates, and the MBA didn't mention the Fed in its press release. Lenders however used the FOMC meeting last week as a marketing opportunity, educating consumers of rates at their lowest level in over a year. 

The share of refis among total activity surveyed was 55.7% last week. Originators in recent weeks have described their own refi shares of volumes doubling in the past weeks and months.

San Diego-based RWM Home Loans saw its refi share of volume grow from 15% in the past year to around 40% in the last few months, said Greg Pettersen, executive vice president of growth and innovation. 

"We're shaping up for October to be our strongest funding month since the first half of 2022," he said. 

The refi excitement has so far outweighed a dull purchase market. Loan officers have explained a seasonal slump as summer ends and school begins. 

The MBA's Purchase Index rose 1% weekly and 2% from the same week last year. A silver lining was a survey-record $413,100 average loan size last week for both purchases and refis. The MBA's Weekly Applications Survey, conducted since 1990, covers over 75% of all retail mortgage applications. 

The average contract interest rate for 30-year fixed rate mortgages with conforming balances fell for the eighth straight week, two basis points to 6.13%. Federal Housing Administration rates meanwhile crossed the "psychologically important" 6% barrier, Kan said, to 5.99% for 30-year fixed-rate loans from 6.12% a week earlier.

Consumers continue to seek out government-backed loans, particularly Department of Veterans Affairs-sponsored mortgages. The highest weekly jump among the MBA's numerous Indexes belonged to the VA Refi Index, up 33% weekly.

Three other categories of borrowers meanwhile saw higher rates on a weekly basis. The average rate for jumbo loans was 6 basis points greater at 6.47%, while 15-year fixed-rate borrowers saw a 5 bps rise to 5.47%. For 5/1 adjustable-rate mortgages, the rate moved 10 bps to 5.76% last week.