Last week marked the second consecutive week of declining mortgage activity as mortgage rates held steady above recent lows, stabilizing overall mortgage activity.
The Market Composite Index, a measure of mortgage loan application volume, decreased 4.7% on a seasonally adjusted basis for the week ending Oct. 3 as refinance and purchase applicants pulled back, according to a weekly survey by the Mortgage Bankers Association (MBA).
However, both refinance and purchase volumes were higher than the same week a year ago. The Refinance Index decreased 8% from the previous week and was 18% higher than the same week one year ago. The unadjusted Purchase Index decreased 1% from the previous week and was 14% higher than the same week a year ago.
“Purchase activity declined by about 1% for the week but continues to show moderate growth on an annual basis, and stronger growth for FHA loans, favored by first-time homebuyers,” noted Mike Fratantoni, senior vice president and chief economist at the MBA, in a press release.
The average rate for 30-year fixed-rate mortgages with conforming loan balances dipped to 6.43% from 6.46% for the week ending Oct. 3, according to MBA data, while average rates for 30-year fixed mortgages backed by the Federal Housing Administration (FHA) decreased to 6.19% from 6.24%.
“With mortgage rates on fixed-rate loans little changed last week, refinance application activity generally declined, with the exception of a modest increase for FHA refinance applications,” Fratantoni added.
The refinance share of mortgage activity decreased to 53.3% of total applications from 55% the previous week. The refinance share sat at 60% for the week ending Sept. 12.
Meanwhile, the adjustable-rate mortgage (ARM) share of activity increased to 9.5% of total applications last week from 8.4% the week prior. The average contract interest rate for 5/1 ARMs — whereby a borrower pays a fixed mortgage rate for the first five years of the loan term, after which it adjusts on an annual basis — fell 15 basis points last week, decreasing to 5.49% from 5.74%, according to MBA data.
The FHA share of total applications increased to 18.5% from 16.8% the previous week, while the share of applications backed by the Department of Veterans Affairs increased marginally to 16.3% from 16.2%. The share of applications backed by the U.S. Department of Agriculture held steady at 0.4%.
