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Mortgage demand is currently heavily skewed towards refinancing as interest rates have fallen for five consecutive weeks.
Total mortgage applications rose just 1.6 percent last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
The average contract rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased from 6.44% to 6.43%, and the points for loans with a 20% downpayment increased from 0.54 (including origination fees) to 0.56. These rates were 78 basis points higher than the same week a year ago.
Mortgage refinance applications fell 0.3% this week, but are 94% higher than a year ago. While that may seem like a big increase, it’s coming from a very low point. Still, it’s the lone bright spot in an industry that has plummeted due to rising interest rates and very weak home buying.
“Refinance applications declined slightly but still show strong annual gains as higher-rate borrowers refinance to lower their monthly payments,” MBA economist Joel Kan said. “The share of refinance applications averaged about 46% in August, the highest monthly average since March 2022.”
Mortgage applications to buy a home rose 3% this week, but are still 4% lower than the same week last year. Home sales have been sluggish all summer, and buyers are facing soaring home prices. Falling interest rates haven’t been enough to sway buyers.
This slight increase is due to demand for government loans: FHA and VA loans offer the option to borrow with a low or no down payment, making them popular with lower-income buyers.
Mortgage rates were little changed on Tuesday as attention shifted to the monthly jobs report and other economic data due later this week.
