Mortgage rates for conventional loans remained steady last week, with overall application volume also largely unchanged, but borrowers are increasingly turning to alternative loan products to save money.
According to the Mortgage Bankers Association’s seasonally adjusted index, total mortgage applications rose slightly by 0.3% compared with the previous week. The average interest rate for 30-year fixed-rate mortgages with conforming balances of $832,750 or less held at 6.21%, with points including the origination fee remaining at 0.56 for loans with a 20% down payment.
Refinance applications grew 1% for the week and were more than double the level from the same week last year, despite mortgage rates being 74 basis points lower a year ago. Most lenders consider a 75-basis-point savings sufficient to justify refinancing costs.
Applications for home purchase loans dropped 2% over the week and were only 4% higher compared to last year. Prospective homebuyers continue to contend with elevated prices, while housing supply, after rising for much of last year, is beginning to tighten again.
FHA loans saw increased activity in both purchase and refinance applications, partly because FHA rates fell and remained 20 basis points below the conforming 30-year fixed rate, noted Joel Kan, MBA’s vice president and deputy chief economist. He added that affordability pressures are prompting more borrowers to consider FHA options despite recent market improvements.
Interest in adjustable-rate mortgages (ARMs) also grew, with their share of total applications reaching 8%, a seven-week high. ARM rates were nearly a full percentage point lower than fixed rates last week.
Meanwhile, Mortgage News Daily reported a slight decline in mortgage rates on Tuesday, following weaker-than-expected retail sales data. Analysts are now closely watching the upcoming monthly employment report. Matthew Graham, COO of Mortgage News Daily, noted that if the jobs data disappoints, rates could continue to fall, but a strong report may push rates back up.