The Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending October 16th showed a seasonally adjusted 5.2% increase in mortgage applications from the previous week. This is the highest level seen since mid-March, when the Covid-19 pandemic began to take its toll on the economy.
The surge in applications can be largely attributed to the Federal Reserve's decision to cut interest rates to near-zero levels in March, which sparked a wave of refinancing activity. Refinancing applications made up 71.1% of total applications, an increase from the previous week. Purchase applications, on the other hand, were down 0.5% from the week prior. Despite the dip, purchase volumes are still 23% higher than they were one year ago.
Looking at the breakdown of applications, conventional loans accounted for 67.3% of total applications, followed by government-backed loans at 32.7%. Conventional loans saw a 4.2% increase in applications from the prior week, while government-backed loan applications rose 6.4%. Adjustable rate mortgage applications also increased from 3.7% to 4.7%.
The average contract interest rate for 30-year fixed-rate mortgages decreased slightly from the previous week, from 2.88% to 2.87%. The average contract interest rate for 15-year fixed-rate mortgages also decreased, going from 2.50% to 2.48%.
Mortgage application volume has been on the rise since the beginning of the COVID-19 pandemic. The Federal Reserve’s decision to cut interest rates to near-zero levels in March has caused a wave of refinancing activity. At the same time, purchase applications are up 23% from last year. Conventional loans make up the majority of applications, rising 4.2% week-over-week. Government-backed loan applications were up 6.4%. The average contract interest rate for 30-year fixed-rate mortgages dropped slightly from the previous week, as did the average contract interest rate for 15-year fixed-rate mortgages.
The uptick in mortgage applications is a sign of both consumer confidence and the successful measures taken by the Federal Reserve. With borrowing costs at historic lows, many Americans are taking advantage of the opportunity to refinance their mortgages, as well as buy homes. To support this trend, the federal government has created housing relief programs and offered tax incentives to spur investment in the residential real estate market. As the U.S. continues to navigate the economic challenges of the pandemic, it is likely that mortgage applications will remain strong.
This article was contributed on Oct 18, 2023