Mortgage applications slumped 12.7% for the week ending Sept. 26, slowing a streak of increased activity sparked by a fall in mortgage rates.
Collapsing refinance demand led the slowdown, according to the Mortgage Bankers Association’s (MBA) Weekly Applications Survey. Mortgage rates spun higher after the Federal Reserve cut interest rates by 25 basis points on Sept. 17.
The Market Composite Index, a measure of mortgage loan application volume, decreased 13% compared with the previous week, on an unadjusted basis. Refinance activity decreased 21% while remaining 16% higher than the same week last year.
“After the burst in refinancing activity over the past month, this reversal in mortgage rates led to a sizeable drop in refinance applications,” said Joel Kan, vice president and deputy chief economist at the MBA, noting that it was consistent with the view that refinance opportunities will be short-lived this year.
Seasonally adjusted purchase demand decreased 1% from one week earlier but remained 16% higher than the same week a year ago on an unadjusted basis. Kan added that the strength of the purchase market “has also been impacted by other factors” such as overall economic conditions, the labor market and inventory.
Consumers’ assessments of current job availability have fallen for nine straight months and renewed inflation concerns have households across the U.S. jittery about personal finances. Meanwhile, a government shutdown that went in effect Wednesday means applications for government-backed mortgages will be processed more slowly, independent of the cooling effect it may have on prospective buyers.
Refinances still comprised the largest share of applications last week despite sliding to 55% from 60.2% the previous week. The adjustable-rate mortgage (ARM) share of activity also decreased from recent highs to 8.4% of all applications last week.
The share of applications for mortgages backed by the Federal Housing Administration (FHA) rose to 16.8% from 15.7% the previous week, while the share of applications for mortgages backed by the Department of Veterans Affairs fell to 16.2% from 17.5%.
The average rate for 30-year-fixed mortgages with conforming loan balances — defined as $806,500 or less — increased to 6.46% from 6.34% for the week ending Sept. 26, according to MBA data. The average rate for 30-year fixed mortgages backed by the FHA increased to 6.24% from 6.14%. The average rate for 5/1 ARMs rose to 5.74% from 5.53%.
