Mortgage
Mortgage Applications Rise for First Time Since August as Rates Ease to 7.37%
By Real Estate Wire Staff, . Real Estate Wire.
Mortgage application volumes posted their first weekly gain since late August, but the Mortgage Bankers Association was quick to temper expectations, calling the rebound a likely outlier given persistent demand headwinds.
The MBA's Market Composite Index, which tracks mortgage application volumes, rose 3.4% on a seasonally adjusted basis for the seven days ending October 23. That ended a seven-week slide that began as 30-year fixed rates climbed above 7% through September. HousingWire and the American Land Title Association both covered the release; all three sources agree on the headline figures.
What moved rates
The 30-year fixed rate dropped to 7.37%, down from a recent peak of 7.5% earlier in October, marking the second consecutive weekly decline. The driver is the 10-year US Treasury yield, to which most mortgage rates are benchmarked. Yields had climbed above 5.3% earlier this month, a level not seen in roughly two decades, before retreating to just below 5% in the past week.
Forward projections remain elevated, however. The Federal Reserve is expected to raise interest rates further to address inflation, and the source notes that forecasts for 10-year yields remain elevated. That backdrop makes a sustained drop in Treasury yields, and by extension mortgage rates, difficult to count on.
What the numbers actually show
The seasonally adjusted purchase index rose 4% over the week. On an unadjusted basis, purchases were up 3% week over week but still sat 18% below the same period a year ago. Refinance applications posted their first weekly gain since mid-August, rising 3%, and accounted for roughly 39% of total application volume.
Joel Kan, deputy chief economist of the MBA, put the situation plainly: "Mortgage rates are still more than a percentage point higher than the same week last year and most homeowners still have rates much lower than prevailing market rates." That rate lock-in dynamic, where existing owners are reluctant to sell and give up their lower-rate mortgages, continues to suppress both listing supply and purchase demand.
Adjustable-rate mortgages, which carry lower initial rates than fixed products, gained ground again, rising to 11.3% of applications from 10.5% in the first half of the month. That share has been climbing since rates started rising sharply over the summer.
Federal Housing Administration loan applications edged up to 16.6% of total volume, with average 30-year FHA rates slipping one basis point to 7.12%. Department of Veterans Affairs loan share dipped slightly, from 11.5% to 11%.
What to watch
The MBA and Fannie Mae both project borrowing costs will remain near current levels through next year, which the MBA expects will push single-family originations below $2 trillion. One week of application gains, driven by a modest rate dip, does not change that picture. The harder question is whether Treasury yields continue their retreat or resume climbing as the Fed tightens further. The 18% year-over-year gap in purchase applications signals how far demand remains from a recovery, and the MBA's own outlook suggests that gap is unlikely to close quickly.
Sources
1. Mortgage Applications Post First Weekly Gain Since August, alta.org
2. Mortgage Applications Increase in Latest MBA Weekly Survey, mba.org
3. Mortgage applications rebound 3.4% as rates decrease to 7.37%, housingwire.com
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