Mortgage rates for 30-year mortgages hit the highest levels in more than seven years while 15-year fixed-rate mortgages reached their highest mark since April 2010. The rate milestones came with a 1.7 percent seasonally adjusted drop in mortgage applications week-over-week, according to the Mortgage Bankers Associations (MBA) Weekly Mortgage Applications Survey for the week ending Oct. 5.
As rates steadily climbed upwards, the mortgage industry watched the downward trend of applications throughout most of the summer until Sept. 19 and Sept. 26, the first back-to-back weeks the survey showed increases in total applications since mid-June.
MBA Chief Economist Mike Fratantoni is among many who are confident that the continued increase in mortgage rates is a positive sign, and declining application numbers are not a cause for concern.
“Mortgage application volume was little changed as mortgage rates remain within the narrow range they have been in the past several months,” Fratantoni said in a September press release.
“The job market remains quite strong, supporting purchase demand, which is 2 percent higher than last year at this time,” he continued. “However, home prices, while decelerating, continue to rise faster than household income. Average loan size for purchase loans dropped to its lowest level since December 2017, a sign that first-time buyers are finding a way into the market.”
For the 30-year fixed-rate mortgage market, average contract interest rates for the week ending Oct. 5 increased to 5.05 percent from 4.96 percent – the highest level since February 2011 – for loans with conforming balances of up to $453,100; to 4.99 percent from 4.93 percent – the highest level since July 2011 – for jumbo loan balances (those greater than $453,100) and to 4.98 percent from 4.95 percent – the highest level since April 2011 – for those backed by the Federal Housing Administration (FHA).
For 15-year fixed-rate mortgages, the average contract interest rate hit its highest point since April 2010 at 4.44 percent, rising from 4.39 percent.
The average contract interest rate for 5/1 adjustable-rate mortgages reached the highest mark since the series began in 2011 at 4.29 percent, an increase from 4.24 percent the week prior.
On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 2 percent higher than the same week one year ago
The share of refinance mortgage activity among total applications dropped to 39 percent from 39.4 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.3 percent of total applications.
FHA mortgage applications accounted for 10.5 percent of all applications, up from 10.2 percent the previous week. The share of mortgage applications backed by the Department of Veterans Affairs (VA) held steady at 10 percent and the share of U.S. Department of Agriculture (USDA)-backed mortgage applications increased to 0.8 percent from 0.7 percent the week prior.