Mortgage demand rose as rates dropped following the October slowdown in inflation growth numbers. However, while purchase mortgage applications increased across all loan types, refinance activity remained depressed.
The market composite index, a measure of mortgage loan application volume, increased 2.7% for the week ending November 11, according to the Mortgage Bankers Association (MBA). The increase was driven by the purchase index, which rose 4%, but was offset by the refinance index, which dropped 2% from a week prior.
“Mortgage rates decreased last week as signs of slower inflation pushed Treasury yields lower,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “The 30-year fixed rate saw the largest single-week decline since July 2022, dropping to 6.9%.”
Mortgage rates, which have been trending up with the Federal Reserve‘s interest rate hike, fell to 6.61% on Tuesday following a lower-than-expected consumer price growth in October. The consumer price index (CPI) rose by 7.7% year over year, marking the smallest 12-month increase since the year ending in January 2022.
With the bond and stock market rallying on the lighter-than-expected inflation, Federal Reserve Governor Christopher Waller on Sunday reiterated that “we’ve still got a ways to go” before the U.S. central bank stops raising interest rates.
The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) dropped to 6.9% from the previous week’s 7.14%. Jumbo mortgage loans (greater than $647,200) rose marginally to 6.51% from 6.50%.
With little incentive to refinance, refi activity was down by 88% compared to the same period in 2021. The refinance share of mortgage activity decreased to 27.6% of total applications from 28.1% from the previous week.
Purchase applications increased for all loan types, however, wutg the average purchase loan dipping to its smallest amount since January 2021, Kan said.
The Federal Housing Administration (FHA) share of total applications increased to 13.5% from 13.3% the week prior. The Veterans Affairs (VA) share of total applications rose to 10.6% from 10.3%, and the United States Department of Agriculture (USDA) share also edged up to 0.6%.
The share of adjustable-rate mortgages (ARM) applications also increased, accounting for 9.6%. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.71% from the previous week’s 4.62%.
The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.