In a shift from recent trends, mortgage application volumes have seen an uptick for the first time in three weeks. This comes alongside noticeable volatility in interest rates, according to data released by the Mortgage Bankers Association (MBA).
The MBA's Market Composite Index, which measures weekly application volume based on surveys, rose by a seasonally adjusted 2.6% for the period ending May 3. Despite this positive movement, the index remains 13.5% lower compared to the same time last year.
Mike Fratantoni, MBA's senior vice president and chief economist, pointed out that despite the Federal Reserve maintaining its bank lending rate after its recent meeting, market indicators have still led to a decrease in mortgage rates. Fratantoni noted, "While the news may have disappointed home lenders, markets still saw favorable-enough signs."
The average contract rate for the 30-year conforming fixed rate saw a notable drop among MBA lenders, declining by 11 basis points to 7.18%. Both purchase and refinance activities showed increased volumes, with the Refinance Index climbing 4.5% from the previous survey.
Encouragingly, there was a more than 5% weekly increase in Federal Housing Administration (FHA)-backed applications, signaling positive momentum in certain segments of the housing market, particularly among first-time homebuyers.
Fratantoni highlighted the significance of government lending programs for these buyers, stating, "First-time homebuyers account for roughly half of purchase loans, and the government lending programs are an important source of financing for these home buyers."
However, challenges remain, as affordability obstacles persist beyond interest rates. Despite the increase in volumes, both purchase and refinance activities still face year-over-year drops. Refinance volumes, in particular, remain below last year's levels.
Federally backed lending saw a growing share, with FHA-sponsored applications accounting for 12.9% of volume and VA-guaranteed loans at 11.7%. Additionally, fixed interest rates across various mortgage types experienced declines, providing potential relief for prospective homebuyers.
The latest data presents a mixed picture for the housing market, with positive indicators alongside ongoing challenges. As interest rates continue to fluctuate, the landscape for both buyers and lenders remains dynamic, shaping the trajectory of mortgage activity in the coming weeks.