Subsiding interest rates and the beginnings of a potential refinance recovery have many in the lending world watching weekly mortgage application volumes even more than usual lately. And well, this week’s application data from the Mortgage Bankers Association (MBA) brings good news and bad news.
First, the bad: anyone hoping for sustained refinance growth is going to be disappointed. The MBA’s Market Composite Index, which measures residential loan application volume, backtracked by 10.1% on a seasonally adjusted basis and 11% non-seasonally compared with the previous week. Much of that retreat came via the refinance side of the index, which, after surging 35% last week, slid by 15% this week.
The refinance share of total mortgage activity also took a small step back, dipping to 46.3% of total applications from 48.6% the week before.
Rich Martin, senior vice president of real estate lending at banking analytics firm Curinos, noted that his firm, which also tracks mortgage applications, has a similar data set using different methodology. Curinos’ data tends to mirror the MBA’s figures directionally; the company’s index for rate-and-term refinance activity jumped 63% two weeks ago and slumped 23% in the most recent week.
Martin believes that the market likely needs to see another meaningful decrease in mortgage rates before it sees another shift in refi activity similar to two weeks ago.
“In general, you are seeing the [week-over-week] activity as a direct response to directional improvement or worsening of rates,” Martin said. “That said, a few other considerations — over 75% of current mortgage holders have a rate below 6%, so while the recent improvement is driving some incremental refinance volume, rates will need to move another 50-100 bps before you see another significant shift in demand and where the economics make sense (e.g., lower payment); roughly 10% of mortgage holders are in the 5%-5.99% range.”
But as Joel Kan, the MBA’s vice president and deputy chief economist, noted, there are still some positive details beyond the headline pullback, perhaps signaling that while another seismic week may be in the cards in the short-term, there’s hope for incremental improvement in the lead-up to a rate cut.
“Both mortgage rates and mortgage applications have now stabilized after a few weeks of financial market volatility, which led to a quick drop in mortgage rates. Applications were lower last week, led by a 15% decrease in refinance activity despite the 30-year fixed mortgage rate declining for the third consecutive week to 6.5%, the lowest since May 2023,” Kan said. “The level of refinance applications remains 23% higher than a month ago and the past two weeks have seen the strongest weekly readings since 2022, as borrowers have sought lower rates. FHA refinance applications bucked the trend and increased for the sixth straight week.”
