Mortgage demand rose slightly last week as mortgage rates moved lower.
Loan application volume increased 1.6% on a seasonally adjusted basis for the week ending Aug. 30 compared to the previous week, according to the Mortgage Bankers Association (MBA).
The MBA’s refinance index decreased 0.3% from the previous week but was 94% higher than the same week in 2023. The seasonally adjusted purchase index increased 3% week over week, inching closer to last year’s levels.
“Most mortgage rates moved lower last week, with the 30-year fixed rate edging down slightly to 6.43%,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement.
“Refinance applications were slightly down but continued to show strong annual gains as borrowers with higher rates have been refinancing to lower their monthly payments. Similar to purchase activity, refinance activity has picked up across the various loan types,” Kan added.
The average 30-year conforming mortgage rate made a drastic downturn in early August, dropping from nearly 7% to a new 2024 low point of 6.58% as of Wednesday, according to HousingWire’s Mortgage Rates Center.
The MBA’s survey showed that the average contract interest rate for 30-year fixed-rate conforming loans (balances of $766,550 or less) decreased to 6.43% last week, down 1 basis point (bps) from the previous week. The average rate for jumbo loans (balances above $766,550) fell 2 bps to 6.73%.
Most loan officers don’t expect mortgage rates to drop drastically even if the Federal Reserve lowers benchmark interest rates this month, a much-anticipated move hinted at by Fed Chair Jerome Powell.
“The market already priced in an expected reduction of a forward curve,” said Josh Erskine, CEO of OneTrust Home Loans. “There is no path just purely on the Fed’s cutting other than the employment markets materially falling apart — unemployment shooting up will drive rates down.
“But if things stay the way they are today, even when the Fed starts the cut, you’re not going to necessarily see a giant gain unless spreads tighten.”
The refinance share of applications decreased to 46.4%, down from 46.6% the previous week. The Federal Housing Administration (FHA) share of total applications decreased from 15.3% to 14.6% during the same period.
The U.S. Department of Veterans Affairs (VA) share of applications increased by 80 basis points to 16.7%. And the U.S. Department of Agriculture (USDA) share remained unchanged at 0.4%.
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