Mortgage borrowing slows for first time in four weeks

Applications for new home loans hit an early-summer lull, dropping for the first time in a month, according to the Mortgage Bankers Association.

The MBA's Market Composite Index, a measure of weekly application volumes based on surveys of the trade group's members, decreased a seasonally adjusted 2.6% for the period ending June 28. The drop comes after two weeks of flattening activity, with the index still managing to squeeze out incremental gains. Volumes finished lower for the first time in four weeks, but compared to the same seven-day period last year, activity was unchanged. 

Weekly borrowing indications diminished as interest rates headed back upward among MBA lenders.

The average conforming fixed-rate for the 30-year mortgage jumped 10 basis points higher to 7.03% from 6.93% seven days earlier. Points used to help buy down the rate inched up to 0.62 from 0.61 for 80% loan-to-value ratio applications in this category. (Loans with conforming balances become eligible for sale to government-sponsored enterprises.)

Average mortgage rates among MBA lenders ended up higher for all loan types tracked by the association. 

The latest upswing in rates occurred despite news of moderating inflation that would seemingly favor a cut in the central bank interest-rate later this year, according to Mike Fratantoni, MBA senior vice president and chief economist.

Mortgage activity slowed virtually across all categories of home lending, he said. The seasonally adjusted Purchase Index took a 3.3% fall, decreasing for the first time in four weeks, like the broader market. Applications dropped 12% below levels of a year ago.  

"Purchase applications decreased the final full week of June, even as both new and existing inventories have increased over the past few months," Fratantoni noted in a press release. While supply is rising and price growth slowing, the housing market still presents affordability hurdles for a portion of consumers, leading to sluggish recent purchase interest, multiple researchers have said.    

"Refinance activity also remains subdued — although there was a slight increase in applications for conventional refinance loans," Fratantoni added.

The Refinance Index slipped downward by 1.5% week over week. But compared to a year ago, refinance volumes leaped 29.1% higher. Homeowners appear to be adjusting to the current state of the housing market, but at the same time remain sensitive to fluctuations this year as they look for opportunities, including refinancing, to cut costs, ICE Mortgage Technology reported this week. 

With a larger decline in purchase loans, the share of refinances relative to overall volume managed to grow to 35.7% from 35.1% a week earlier in MBA's survey.

Federally backed lending slowed for both purchases and refinances, with the MBA Government Index dipping 5.7% week over week on a seasonally adjusted basis. The share of VA loans also shrank over the seven-day period

Department of Veterans Affairs-guaranteed applications garnered 12.9% of the week's total volume, falling from 13.8% in the prior survey. Meanwhile, the share of loans insured by the Federal Housing Administration remained the same at 13.1%. U.S. Department of Agriculture-backed applications accounted for 0.3% of activity, down from 0.4% seven days earlier. 

The average rate for the 30-year FHA-insured home loan rose 8 basis points to 6.9% from 6.82%. Points decreased to 0.95 from 0.99.  

The 15-year fixed contract rate also surged 10 basis points to 6.56% from 6.46% in the previous survey. Borrower points used plunged to 0.54 from 0.75 a week earlier.

The 5/1 adjustable-rate mortgage averaged 6.38%, rising from 6.29% seven days prior. Points used to buy down rates on the loan, which start with a fixed 60-month term, increased to 0.54 from 0.5. 

The 30-year fixed contract jumbo average for loans with balances above conforming levels climbed up to 7.11% from 7.04%. Borrowers typically used 0.5 worth of points, down from 0.6, for 80% LTV-ratio loans.

Overall, adjustable-rate mortgages of all types accounted for 6% of weekly volume, pulling back from 6.1% in the previous survey.