The demand for home loans decreased 1.4% for the week ending Aug. 15, according to the Mortgage Bankers Association. This dip comes after two straight weeks of mortgage applications increasing.
The decrease comes despite mortgage interest rates dropping to their lowest in 10 months. The average rate on a 30-year fixed home loan was 6.58% for the week ending Aug. 14, according to Freddie Mac. That number was down again from 6.63% the prior week.
The Market Composite Index, a measure of mortgage loan application volume, decreased 1.4% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the index decreased 2% compared to a week prior.
The refinance index decreased 3% from the previous week and was 23% higher than the same week one year ago.
The seasonally adjusted purchase index increased 0.1% from the previous week. The unadjusted purchase index decreased 2% compared with the week prior and was 23% higher than the same week one year ago.
Fewer homeowners decided to refinance with the refinance share of mortgage activity decreasing to 46.1% of total applications from 46.5% one week earlier. The adjustable-rate mortgage (ARM) share of activity decreased to 8.6% of total applications.
On the flip side, the Federal Housing Administration (FHA) share of total applications increased to 19.1% from 18.4% the week prior.
Veterans Affairs loan applications decreased to 13.4% from 14.2% the week prior. USDA loan applications increased to 0.6% from 0.5% the week prior.
“Mortgage rates increased slightly last week, with the 30-year fixed rate now at 6.68 percent. Applications were down as a result, driven by a 16 percent decrease in VA applications, which are typically a volatile segment of the market,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“FHA refinance applications increased over the week, as the FHA rate, at 6.39 percent, remained competitive relative to other loan types.”
Home loan applications decreased from the week prior despite mortgage interest rates falling to its lowest in 10 months.
Contract rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) increased to 6.68% from 6.67%, with points decreasing to 0.60 from 0.64 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.64% from 6.70%, with points increasing to 0.60 from 0.56 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.39% from 6.40%, with points decreasing to 0.66 from 0.77 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages increased to 5.96% from 5.93%, with points increasing to 0.70 from 0.63 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
The average contract interest rate for 5/1 ARMs increased to 6.01% from 5.80%, with points decreasing to 0.63 from 0.67 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.
“Purchase applications were little changed over the week but were at the strongest pace in four weeks and continued to run well ahead of last year’s pace,” says Kan. “Prospective homebuyers remain more active compared to last year despite economic headwinds and uncertainty and affordability challenges.”
Mortgage rates calculated
Mortgage rates are calculated by various factors in the economy, and the length of your loan will also figure into the mortgage rate you qualify for.
The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, according to Fannie Mae. As the yield on the 10-year Treasury note moves, mortgage rates follow.
The yield on the 10-year Treasury note is determined by expectations for shorter-term interest rates in the economy over the duration of a bond, plus a term premium.
