Alarming Drop: Mortgage Applications Plunge 6% in America

Alarming Drop: Mortgage applications in America have plunged 6%, according to the latest survey by the Mortgage Bankers Association. Check out the key findings and trends in the mortgage market.

According to the latest Weekly Mortgage Applications Survey by the Mortgage Bankers Association for the week ending September 29, 2023, there has been a 6.0 percent decrease in U.S. mortgage applications compared to the previous week. The Market Composite Index, which measures mortgage loan application volume, also decreased by 6.0 percent on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, the Index showed a 6 percent decrease compared to the previous week. The Refinance Index, specifically, experienced a 7 percent decrease from the previous week and was 11 percent lower compared to the same week last year. Similarly, the seasonally adjusted Purchase Index saw a 6 percent decrease from one week earlier, with the unadjusted Purchase Index showing a 6 percent decrease compared to the previous week and a significant 22 percent decrease compared to the same week one year ago.

Alarming Drop: Mortgage Applications Plunge 6% in America | ogusyis

In terms of the distribution of mortgage activity, the refinance share decreased slightly to 31.7 percent of total applications compared to the previous week's 31.9 percent. On the other hand, the adjustable-rate mortgage (ARM) share of activity increased to 8.0 percent of total applications. Looking at specific loan types, the FHA share of total applications increased to 14.5 percent from 14.1 percent in the previous week, while the VA share decreased to 10.1 percent from 10.9 percent. The USDA share remained unchanged at 0.5 percent from the week prior.

Looking at interest rates, there have been notable changes this week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) increased to 7.53 percent from 7.41 percent. Additionally, the points associated with these loans increased to 0.80 from 0.71, including the origination fee, for 80 percent loan-to-value ratio (LTV) loans. This represents an increase in the effective rate from last week.

Similarly, for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200), the average contract interest rate increased to 7.51 percent from 7.34 percent. However, the points associated with these loans decreased to 0.74 from 0.78, including the origination fee, for 80 percent LTV loans. The effective rate increased from the previous week.

For 30-year fixed-rate mortgages backed by the FHA, the average contract interest rate increased to 7.29 percent from 7.16 percent. The points associated with these loans also increased to 1.01 from 0.96, including the origination fee, for 80 percent LTV loans. Similar to the other mortgage types, the effective rate increased from last week.

Moving on to 15-year fixed-rate mortgages, the average contract interest rate increased to 6.86 percent from 6.73 percent, with points decreasing slightly to 1.14 from 1.17, including the origination fee, for 80 percent LTV loans. Once again, the effective rate increased from the previous week.

Finally, for 5/1 ARMs, the average contract interest rate increased to 6.49 percent from 6.47 percent, with points decreasing to 1.21 from 1.58, including the origination fee, for 80 percent LTV loans. However, the effective rate decreased from the previous week.

In conclusion, the latest Weekly Mortgage Applications Survey reveals a significant decrease in U.S. mortgage applications compared to the previous week. Various factors such as the decrease in the Refinance Index and the decreased share of mortgage activity in different loan types contribute to these findings. Additionally, interest rates have undergone notable changes, with an increase observed across multiple mortgage types. These developments suggest potential shifts in the mortgage market and highlight the need for borrowers and stakeholders to closely monitor these trends.