U.S. home loan applications declined for a second consecutive week, with the market composite index falling 4.7%, though at a slower pace than previously. A significant shift is observed in borrower behavior, as demand for adjustable-rate mortgages (ARMs) climbed to 9.5% of total applications, driven by a nearly one percentage point rate differential compared to the 30-year fixed rate, which slightly decreased to 6.43%. This indicates borrowers are actively seeking more affordable financing options amidst slowing refinance activity and modest, albeit stable, purchase growth.
(RTTNews) - Home loan applications in the U.S. declined for a second week in a row, but at a slower pace, and there was an increase in demand for the riskier adjustable-rate mortgages as homebuyers look for best deals, survey data from the Mortgage Bankers Association showed on Wednesday. The market composite index, a measure of the house purchase mortgage loan application volume, fell a seasonally adjusted 4.7 percent in the week ended October 3 after a 12.7 percent slump in the previous week. The MBA survey also showed that the refinance index declined 8 percent, which was much slower than the 21 percent drop in the previous week. The purchase index dropped 1 percent, same as in the previous week. The refinance share of mortgage activity decreased further to 53.3 percent of total applications from 55.0 percent in the previous week. The 30-year fixed mortgage rate fell to 6.43 percent, after climbing to 6.46 percent in the previous week. "With mortgage rates on fixed-rate loans little changed last week, refinance application activity generally declined, with the exception of a modest increase for FHA refinance applications," MBA's SVP and Chief Economist Mike Fratantoni said. "Refinance volume remains somewhat elevated relative to levels of a month ago." Despite the recent weakening, purchase activity continues to show moderate growth on an annual basis, and stronger growth for FHA loans, favored by first-time homebuyers, the economist noted. The survey showed that the adjustable-rate mortgage, or ARM, share of activity climbed to 9.5 percent of total applications from 8.4 percent. "Our survey shows 5/1 ARM rates are averaging almost a percentage point below 30-year fixed rates, and this differential is leading more purchase and refinance applicants to consider ARMs," Fratantoni added. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc. U.S. home loan applications experienced a second consecutive weekly decline, with the market composite index falling 4.7%, a slower pace compared to the previous week's 12.7% slump. The refinance index decreased 8%, an improvement over the prior 21% drop, while the purchase index remained flat, down 1%. Concurrently, the 30-year fixed mortgage rate slightly decreased to 6.43% from 6.46% previously. A significant shift in borrower preference is evident, with Adjustable-Rate Mortgages (ARMs) increasing their share to 9.5% of total applications from 8.4%. This surge is primarily driven by a nearly one percentage point rate differential, positioning 5/1 ARMs as a more attractive option against 30-year fixed rates. This behavior highlights borrowers' active pursuit of lower initial payment structures in the current high-rate environment. Despite the recent weekly declines, overall purchase activity continues to exhibit moderate annual growth, notably stronger for FHA loans favored by first-time homebuyers. While the refinance share of activity decreased to 53.3% from 55.0%, refinance volume remains somewhat elevated compared to levels from a month ago. The market's mixed sentiment reflects the ongoing interplay between persistent interest rate levels and adaptive consumer financing strategies.
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