Demand for mortgage loans increased for the first time in six weeks, ahead of the Federal Reserve’s meeting on Wednesday, when observers expect at least another 75 basis points hike to the federal funds rate.
According to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, increased 3.8% for the week ending Sep. 16, compared to the previous week. It was also down 64.3% compared to the same week in 2021.
The refinance index gained 10.3% from the previous week but fell 82.6% from the same week in 2021. Meanwhile, according to the MBA, the purchase index was up 1% from the previous week and decreased 29.5% from the same week in 2021.
“As with the swings in rates and other uncertainties around the housing market and broader economy, mortgage applications increased for the first time in six weeks but remained well below last year’s levels,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting, in a statement. “The weekly gain in applications, despite higher rates, underscores the overall volatility right now as well as Labor Day-adjusted results the prior week.”
The latest weekly survey data from Freddie Mac shows the 30-year fixed-rate mortgage rose to an average of 6.02% this week past week. A year ago, rates averaged 2.86%.
MBA’s estimate, however, indicated the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 6.25%, from the previous week’s 6.01%. Jumbo mortgage loans (greater than $647,200) increased to 5.79% from 5.56% in the same period.
“Treasury yields continued to climb higher last week in anticipation of the Federal Reserve’s September meeting, where it is expected that they will announce – in their efforts to slow inflation – another sizable short-term rate hike,” Kan said. “Mortgage rates followed suit last week, increasing across the board, with the 30-year fixed rate jumping 24 basis points to 6.25% – the highest since October 2008.”
The MBA data shows the refinance share of all mortgage activity rose to 32.5% of total applications this week from the previous week’s 30.2%.
The Federal Housing Administration’s (FHA) share of total applications fell marginally to 13.3% from the previous week’s 13.4%. The Veterans Affairs’s (VA) share of applications decreased to 10.9%, from 11.3%, and the United States Department of Agriculture’s (USDA) share went from 0.7% to 0.6%.
The share of adjustable-rate mortgages (ARM) applications remained unchanged at 9.1% this week. According to the MBA, the average interest rate for a 5/1 ARM increased to 5.14% from 4.83% a week prior.
The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.