The Mortgage Bankers Association showed mortgage applications in the US in the first week of May jumped 6.3%. Applications to refinance a home loan surged 10% and those applying to buy a home rose 4.8%. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) dropped by 2bps to 6.48%, the lowest in three weeks, still homeowners still have reduced incentive as borrowers face an ongoing affordability challenge and a low inventory problem.
Mortgage Bankers Association for the week ending 5 May 2023
- Mortgage applications w.e. 5 May +6.3% vs -1.2% prior
- Market index 227.8 vs 214.4 prior
- Purchase index 173.7 vs 165.8 prior
- Refinance index 507.1 vs 461.2 prior
- 30-year mortgage rate 6.48% vs 6.50% prior
- 30-year mortgage rate with conforming loan balances ($726,200 or less) decreased to 6.48 percent from 6.50 percent, with points decreasing to 0.61 from 0.63 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
“Mortgage applications responded positively to a drop in rates last week, as the Fed signaled a potential pause at the current level for the federal funds rate in anticipation of inflation slowing and tightening financial conditions that will slow economic and job growth,” Joel Kan MBA’s deputy chief economist said.
Rising rates are reducing home-loan refinancings, which powered much of the mortgage market’s boom in 2020 and 2021.
Higher mortgage rates typically slow home-buying activity, and therefore the number of applications. Expectations that the Federal Reserve will raise interest rates this year to control inflation drove up mortgage rates. Home prices continue to push homeownership out of the question for many Americans.
ARMS
- The Federal Housing Administration‘s (FHA) decreased to 12.1 percent from 12.5 percent the week prior.
- The United States Department of Agriculture (USDA) share decreased to 0.4 percent from 0.5 percent the week prior.
- The Veterans Affairs‘ (VA) share of total applications increased to 12.9 percent from 11.3 percent the week prior.
- The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.91 percent from 6.01 percent, with points increasing to 0.58 from 0.55 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
- The average contract interest rate for 5/1 ARMs decreased to 5.35 percent from 5.48 percent, with points decreasing to 0.79 from 1.14 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.
In 2007, just before the housing market crash, there were 13.1 million ARMs, representing 36% of all mortgages.
The survey covers over 75 percent of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. Base period and value for all indexes is March 16, 1990=100.
Source: Mortgage Bankers Association of America
From The TradersCommunity News Desk