Home Mortgage Applications Are Up, But High-Interest Rates Still Steer A Less-Than-Thriving Buyers Market

For the first time in a month, home mortgage applications increased for both purchased property and refinancing applications, according to the Mortgage Bankers Association (MBA). 

The MBA’s Market Composite Index, which looks at mortgage loan volume, jumped 3.2% from a week earlier, based on a seasonally adjusted basis. But like most news this year, the good coincided with the not-so-good as the U.S. Federal Reserve announced Wednesday it was increasing its benchmark interest rate to the highest level in 15 years. 

Also tempering the good news was that while mortgage applications rose for the week, they were still nearly 40% lower than the same week a year ago. No doubt the effect of interest rates, while a bit lower and now under 7%, still represents a considerable increase over rates available a year ago. The MBA’s Vice President and Deputy Chief Economist Joel Kan reported the 30-year fixed rate inched up again this week to 6.42% but still hovered around the lowest rates seen in a month. 

“Mortgage rates increased slightly after a month of declines, as financial markets reacted to mixed signals regarding inflation and the Federal Reserve’s next policy moves,” he said before the Fed’s Wednesday announcement that it was raising rates half a percentage point, breaking a string of four straight three-quarter point hikes. “With rates more than three percentage points higher than a year ago, both purchase and refinance applications are still well behind last year’s pace.” 

The MBA reported that the percentage of mortgage loan refinancing applications has continued to rise, now representing 29.4% of total applications, compared to 28.7% the previous week. Adjustable-rate mortgage (ARM) applications increased slightly to 7.7% of all applications. Economists have pointed to the lower percentage of ARM loans compared to those of the last housing crisis as a factor in quelling fear about there being a repeat. In the mid-2000s, more than one-third of all home mortgages were ARMs. 

But despite high-interest rates, the MBA’s Kan hopes the drop in home prices may spike a renewed interest from buyers. 

“Along with further declines in mortgage rates, it may encourage more buyers to return to the market in the coming months.”

But the amount of mortgage applications or any drop in home prices appears to remain a minor player in igniting a resurgence of home buyers in the market. Matthew Bragrahm, chief operating officer of Mortgage News Daily, says it’s still about rates and the Fed’s behavior. 

“A friendly enough Fed could easily break the range, but we have our doubts as to how much fuel the Fed will want to add to the fire,” he said. “If anything, the Fed is more likely to try to temper the exuberance because the exuberance is counterproductive to the Fed’s goals.” 

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