At FREEandCLEAR, we follow the Mortgage Bankers’ Association (MBA) mortgage applications index which measures both purchase and refinance applications for mortgage lenders across the country. An increase in the MBA applications index reflects an increase in mortgage applications while a decrease in the index reflects a decline in mortgage applications. After three consecutive weeks of increases, the mortgage application index decreased for the week ended October 24th.
For the week ended October 24th, the refinance application index decreased 7.0% as compared to the prior week, which was up a significant 23.0%. The purchase application index decreased 5.0% as compared to the prior week, which was also down 5.0%. The composite index, which includes both purchase and refinance mortgage applications, decreased 6.6% as compared to the prior week. Following three weeks of strong growth, the decrease in the index was not totally unexpected. Interest rates remained relatively steady as the average interest rate for conforming loans increased slightly to 4.13%, as compared to 4.10% for the prior week. (Source: Bloomberg)
What it Means for Mortgage Borrowers
The decline in mortgage refinance application activity is not surprising given the strong uptick in activity over the past month, driven by lower interest rates. The continued decrease in purchase mortgage activity suggests that it may take more time for falling interest rates and moderating home prices to bring buyers into the real estate market. This is actually positive news for home buyers as fewer buyers means less competition when you are trying to purchase a home. If interest rates and home prices remain steady, FREEandCLEAR expects home purchase activity to gradually pick up heading into 2015. First-time home buyers should check out our First-Time Home Buyer Cheat Sheet and monitor interest rates using the COMPARE LENDERS feature on FREEandCLEAR to assess if now is a good time to make a move.
The FREEandCLEAR Mortgage Expert