Mortgage demand dipped for a third straight week, with applications decreasing 1.8% for the week ending Oct. 10, according to the latest survey from the Mortgage Bankers Association (MBA).
The association’s refinance index fell 1% week over week, while its seasonally adjusted purchase index shed 3%.
Joel Kan, MBA’s vice president and deputy chief economist, observed in a press release that while both conventional mortgage applications and those backed by the Department of Veterans Affairs (VA) experienced declines, Federal Housing Administration (FHA) applications “saw a stronger week, and FHA refinance applications in particular increased 12% as the FHA rate stayed more than 10 basis points lower than the conventional fixed rate.”
MBA data shows the average rate for 30-year fixed-rate mortgages with conforming loan balances of $806,500 or less fell one basis point to 6.42% last week, while the 30-year FHA rate was unchanged at 6.19%.
Kan also pointed out that while purchase applications declined for the third consecutive week, purchase demand is still 20% ahead of last year’s pace “as improving inventory conditions in certain markets continue to maintain homebuyer interest.”
The refinance share of mortgage activity rose to 53.6% of total applications from 53.3% the previous week. The adjustable-rate mortgage share of activity decreased to 9.3% from 9.5% the week prior.
The favorable FHA rates led to a 20.5% application share, up from 18.5% the prior week. The VA share fell to 14.9% from 16.3%, while the U.S. Department of Agriculture share held steady at 0.4%.
Last week’s overall tepid mortgage demand was likely also influenced by the uncertainty surrounding the ongoing U.S. government shutdown, now in its 15th day.
At least one mortgage industry veteran, Melissa Cohn of William Raveis Mortgage, is advising clients to stay patient until more clarity emerges on how the federal gridlock will impact longer-dated bond yields and mortgage rates.
“Right now, I’m advising people that perhaps they should hold off on locking in [a mortgage rate] until they get a better sense of where rates are headed,” Cohn said in commentary provided to Scotsman Guide.
