Mortgage Applications Drop as Interest Rates Rise

Mortgage Weekly Update

Overall mortgage activity slipped this week, falling 0.6% over the week prior. Purchase loan applications fell 2%, while refinancing actually rose, though only a slight 0.2%.

The drop is likely due to rising mortgage rates, which increased to 3.02% this week, according to the Mortgage Bankers Association. That’s a two-point jump over last week and the highest rate seen since September.

There’s still room to be optimistic, though — at least according to Joel Kan, associate vice president of economic and industry forecasting at MBA.

“Homebuyer demand remains strong this fall, but purchase applications did decrease 2%, with both conventional and government purchase activity taking a step back,” Kan said. “Given the ongoing housing market recovery and low rate environment, both purchase and refinance applications remained robust compared to a year ago, rising 26% and 74%, respectively.”

Refinances accounted for more than 66% of all mortgage applications over the last week, up from 65.6% the week prior. FHA loan applications also increased, jumping from 10.7% to 11.8% of total application volume.

More in mortgage and housing news

  • The share of mortgage loans in forbearance dropped to 5.92% this week, according to MBA. That’s down from 6.23% and amounts to about 3 million homeowners.
  • September’s numbers are in, and it was a good month for new home sales. According to the Builder Application Survey from MBA, applications for new home purchases were up a whopping 38.2% for the month. 
  • The Consumer Financial Protection Bureau issued its final ruling on the GSE patch, which allows Fannie Mae and Freddie Mac to purchase qualified mortgages above the recommended 43% debt-to-income ratio. According to the Bureau, the patch will not expire in January 2021, as previously stated. Instead, it will expire when/if the GSEs exit conservatorship.

This week in mortgage rates

Interest rates fell on all loan types this week, with the exception of FHA loans, which held steady from last week’s numbers.

Here’s how rates looked for each one:

  • Conforming 30-year, fixed-rate loans: 3.02%, 0.36 points
  • Jumbo 30-year, fixed-rate loans: 3.33%, 0.30 points
  • FHA 30-year, fixed-rate loans: 3.12%, 0.35 points
  • 15-year, fixed-rate loans: 2.61%, 0.31 points
  • 5/1 adjustable-rate loans: 2.86%, 0.85 points

Be sure to check back here next week for the latest mortgage news and interest rates.

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By Aly Yale / October 23rd, 2020 / Categories: / Tags:

Aly Yale

Aly J. Yale is a mortgage and real estate writer based in Houston. Connect with her at AlyJYale.com or on Twitter at @AlyJwriter.