A reduction in adjustable mortgage rates led some cost-stressed borrowers to forsake fixed-rate security and drove mortgage application volume up slightly during the week ended October 6. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of that volume, increased 0.6 percent on a seasonally adjusted basis after a 6.0 percent drop a week earlier. On an unadjusted basis, the Index increased 1.0 percent. The Refinance Index rose 0.3 percent compared to the prior week and was 9.0 percent lower than the same week one year ago. The refinance share of mortgage activity dipped to 31.6 percent of total applications from 31.7 percent. [refiappschart] The Purchase Index was 1 percent higher than a week earlier on both a seasonally adjusted and an unadjusted basis. It was 19 percent below its level during the same week in 2023. [purchaseappschart] “While most mortgage rates increased last week, rates on ARMs [adjustable-rate mortgages] declined, leading to an increase in ARM volume and an increase in overall applications. The level of ARM applications increased by 15 percent over the week, bringing the ARM share up to 9.2 percent of all applications , the highest share since November 2022. The yield curve has become less inverted in recent weeks and ARM pricing has certainly improved,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The 30-year fixed mortgage rate is at 7.67 percent – the highest level since 2000 and 40 basis points higher than a month ago. Application activity remains depressed and close to multi-decade lows, with purchase applications still almost 20 percent behind last year’s pace. Refinance applications also continue to be limited, and the average loan size has fallen to its lowest level since 2017.”
