Weekly Real Estate News
Summary
MBA reports mortgage applications down 2.7 percent for the week ending October 9, purchase applications down 4 percent, the conforming rate at 7.50 percent and ARM share at 10.5 percent.
Mortgage applications fell another 2.7% last week as higher borrowing costs continued to squeeze homebuyers and borrowers seeking to refinance, according to the Mortgage Bankers Association’s October 14 survey. Adjustable-rate loans accounted for 10.5% of applications, their highest share in a year.
The decline covered the week ending October 9 and extended a run of weekly decreases. The MBA’s seasonally adjusted purchase index dropped 4%, while its refinance index slipped 0.4%. Refinance applications were 56% below the same week a year earlier; the unadjusted purchase index was down 16% from a year ago.
At the same time, the average contract rate on a conforming 30-year fixed-rate mortgage rose to 7.50%, from 7.49% a week earlier, reaching its highest level since November 2023. The MBA measure includes loans with balances of $832,750 or less and is based on applications for mortgages with an 80% loan-to-value ratio. Average points eased to 0.83 from 0.84, including the origination fee.
“Mortgage applications decreased as rates moved higher last week,” said Joel Kan, the MBA’s vice president and deputy chief economist. Kan said the higher cost of fixed-rate borrowing is prompting more borrowers to consider adjustable-rate mortgages to reduce their initial monthly payments.
Borrowers shift toward adjustable rates
Adjustable-rate loans made up 10.5% of all applications, up from 10.3% the previous week. The average contract rate for a 5/1 adjustable-rate mortgage increased to 6.54% from 6.43%. Although the initial rate was lower than that of a 30-year fixed mortgage, borrowers taking out ARMs remain exposed to potential payment changes after the fixed introductory period.
The refinance share of all applications rose to 37.7% from 37.0%, even as the actual refinance index declined. The share can increase when purchase activity falls more sharply than refinancing activity; it should not be mistaken for an increase in refinance volume.
Kan said a 5% decline in FHA refinance applications accounted for much of the week’s refinance weakness. The FHA share of all applications held at 16.4%, while VA loans increased to 11.9% of applications from 11.8%. USDA loans rose to 0.6% from 0.5%.
Borrowing costs increased across several other loan types. The average contract rate for jumbo 30-year mortgages rose to 7.49% from 7.39%, while the FHA-backed 30-year rate climbed to 7.19% from 7.14%. The average 15-year fixed rate rose to 6.87% from 6.71%.
New inflation data complicates the rate outlook
The survey captures borrower activity before the September Consumer Price Index was released Wednesday. That report showed annual consumer inflation accelerating to 3.7%, with gasoline prices accounting for more than half the monthly increase. The figures could influence Treasury yields and mortgage pricing, but they cannot explain application decisions made during the preceding survey week.
For lenders, the continued decline in purchase demand and the greater use of ARMs point to a market in which rate sensitivity is affecting both borrower choice and origination volume. The MBA’s weekly survey is an early measure of application activity, not a count of completed loans or home sales.
In last week’s report, the MBA recorded a 4.2% decline in applications as the conforming rate reached 7.49%. The latest reading shows demand weakening further even though the fixed-rate increase was comparatively small.
