Mortgage volumes head up for fourth straight week

Easing interest rates brought borrowers back to the table, sending residential loan application volumes higher for a fourth consecutive week, according to the Mortgage Bankers Association.

The MBA's Market Composite Index, a measure of application activity based on surveys of its members, increased a seasonally adjusted 2.9% compared to the previous week for the seven-day period ending March 24. Despite the recent upswing, volumes were still 46.5% lower on a year-over-year basis.

Both refinance and purchase loans drove numbers higher. The Refinance Index rose 4.8% compared to a week earlier, but landed 61% lower from the same survey period in 2022.

"Most homeowners still have rates significantly lower than current levels, leaving only a small pool of borrowers with an incentive to refinance," said Joel Kan, MBA vice president and deputy chief economist, in a press release. The share of refinances relative to total volume clocked in at 29.1%, rising from 28.6% the previous week.

Like the refinance market, housing sales have proven to be sluggish to start 2023, as homeowners appear reluctant to give up on lower interest rates, according to several recent real estate research groups. But despite fewer new listings, the seasonally adjusted Purchase Index climbed up higher for a fourth consecutive week by 4.8%, although it fell 35.3% on an annual basis.

"Recent increases, along with data from other sources showing an uptick in home sales, is a welcome development," Kan said.

The tepid market, though, has hampered any momentum toward building affordability that would assist many aspiring homeowners this year. In January, the average home price inched up 0.2% from December, the Federal Housing Finance Agency reported earlier this week in its monthly House Price Index. 

"Many of the January closings, on which this month's HPI is constructed, reflect rate locks after mortgage rates declined from their peak in early November. Inventories of available homes for sale remained low," said Nataliya Polkovnichenko, supervisory economist in FHFA's division of research and statistics, in a press release.  

Price growth increased 5.3% on a yearly basis, further slowing from 6.6% in December. The pace of movement, though, is a far cry from January 2022, when FHFA's index showed housing costs surging 18.4%. Properties in the U.S. Census Bureau's Pacific geographic division actually posted a year-over-year decrease in the 12-month period, with prices inching down 1.5% In comparison, average housing costs in the South Atlantic came in 9.6% higher.

Weekly average purchase amounts on mortgage applications as reported by MBA members, similarly, have risen since beginning the year at $389,000. But after hitting a 2023 high mark in mid March of $437,700, the average retreated 1.6% last week to $430,500.

The mean refinance size headed in the other direction, rising 1.6% to $271,800 from $267,700. The overall average across all new applications last week decreased to $384,300 from $389,000, a 1.2% fall from seven days earlier. 

The share of government-sponsored applications relative to total activity remained largely the same week over week, with Federal Housing Administration-guaranteed loans accounting for the exact same 12.3% of volume. Mortgages backed by the Department of Veterans Affairs made up 11.6% of activity compared to 11.7% the prior week, while new applications coming via U.S. Department of Agriculture programs remained at 0.5%.

With interest rates declining for a third straight week, the share of adjustable-rate mortgages, slid to 7.7% after inching up to 8.6% in the last survey. ARMs frequently gain in popularity when rates rise. 

The average for the 30-year fixed rate mortgage with balances under the conforming limit of $726,200, making them eligible for sale to the government-sponsored enterprises, dropped to 6.45%, the lowest level in over a month, Kan said. A week earlier, it came in at 6.48%. Points decreased to 0.62 from 0.66 for 80% loan-to-value ratio loans.

Jumbo mortgage rates remained lower than their conforming counterparts, with the average also decreasing by 3 basis points to 6.27% from 6.3%. Points edged down to 0.54 from 0.55.

The 30-year contract rate for FHA-backed mortgages averaged 6.33% among MBA lenders, inching up by a single basis point from 6.32% a week earlier. Points fell to 0.93 from 1.07.

For the 15-year fixed rate mortgage, the contract average rate tumbled 18 basis points to 5.84% from 6.02% seven days earlier. Points decreased to 0.57 from 0.6.

The average rate for hybrid 5/1 ARMs, though, came in higher from one week prior, landing at 5.62%, up 4 basis points from 5.58%. Points also increased to 0.91 from 0.75. The loans carry a fixed rate for the first five years.