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Would-be homebuyers are responding to the biggest drop in mortgage rates in 16 months, with purchase mortgage applications trending up last week for the first time in a month according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).
The MBA’s Weekly Mortgage Applications Survey, released Wednesday, showed requests for purchase loans were up by a seasonally adjusted 3 percent last week when compared to the week before, reversing three weeks of declines. The survey showed purchase loan applications last picked up by an anemic 1 percent during the week ending Oct. 6.
Compared to the same time last year, demand for purchase loans was still off by 20 percent, with many homebuyers remaining on the sidelines until more for-sale inventory becomes available, MBA Deputy Chief Economist Joel Kan said in a statement.
“The 30-year fixed mortgage rate dropped by 25 basis points to 7.61 percent, the largest single-week decline since July 2022,” Kan said. “Last week’s decrease in rates was driven by the U.S. Treasury’s issuance update, the Fed striking a dovish tone in the November [Federal Open Market Committee] statement, and data indicating a slower job market. Applications for both purchase and refinance loans were up over the week but remained at low levels.”
Last week the Treasury Department announced that it would shift some of the burden of servicing the nation’s growing debt from longer-term debt like 30-year bonds and 10-year Treasury notes to shorter-dated 2-, 3-, 5-, and 7-year notes.
The Treasury plans to do so by boosting auctions of those notes by $27 billion through the end of January. While auctions of 10-year notes and 30-year bonds will also be boosted by $3 billion, that’s less than bond market investors had been expecting, based on previous guidance from the Treasury Borrowing Advisory Committee.
Because 10-year Treasurys and mortgage-backed securities that fund most mortgages are seen as similar investments, mortgage rates track changes in the 10-year yield closely. Last week’s news that the supply of long-term Treasury bonds and notes will be less than expected sent bond prices up and yields down.
The downward momentum in long-term bond yields and mortgage rates continued as Fed policymakers sounded less hawkish in refraining from raising rates on Nov. 1, and a jobs report released Friday showed unemployment rising toward a 4 percent threshold that, if sustained, would trigger a recession warning.
Mortgage rates retreat from peaks
Rates on 30-year fixed-rate conforming mortgages averaged 7.45 percent Tuesday, down from a 2023 peak of 7.83 percent on Oct. 25, according to daily rate lock data tracked by the Optimal Blue Mortgage Market Indices. Freddie Mac records dating to 1970 show that during the final week of October, mortgage rates hit levels not seen since November 2000.
Last week’s dip in rates also helped boost demand for refinancing, with the MBA survey showing requests to refinance up 2 percent compared to the week before, but down 7 percent from a year ago. Requests to refinance accounted for 31.4 percent of all mortgage loan applications.
For the week ending Nov. 3, the MBA reported average rates for the following types of loans:
- For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 7.61 percent, down from 7.86 percent the week before. With points decreasing to 0.69 from 0.73 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
- Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 7.58 percent, down from 7.80 percent the week before. With points decreasing to 0.65 from 0.67 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 30-year fixed-rate FHA mortgages, rates averaged 7.36 percent, down from 7.57 percent the week before. With points decreasing to 0.91 from 1.03 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- Rates for 15-year fixed-rate mortgages averaged 6.98 percent, down from 7.14 percent the week before. With points decreasing to 0.88 from 1.22 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
- For 5/1 adjustable-rate mortgage (ARM) loans, rates averaged 6.76 percent, down from 6.77 percent the week before. With points decreasing to 0.80 from 1.46 (including the origination fee) for 80 percent LTV loans, the effective rate also decreased.
Requests for ARM loans accounted for 9.8 percent of all mortgage applications last week, and the share of FHA applications remained unchanged at 14.7 percent from the week before.
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Email Matt Carter