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.
Although the composite mortgage applications index dropped for the week ended May 1st, the purchase applications index gained 1.0% in a positive sign for the real estate market. After being flat last week, the purchase applications index increased for the fifth time in six weeks. The refinance applications index decreased 8.0% after dropping 4.0% for the prior week. Dragged down by the refinance index, the composite mortgage application index, which includes both purchase mortgages and refinancings, decreased 4.6%, doubling the 2.3% decline for the prior week. Although overall mortgage applications declined for the week, the continued strength of the purchase applications segment shows that more home buyers are able arrange mortgage financing. Attractive interest rates are one of the key drivers of home buying activity but rates have inched up over the past couple of weeks. The average interest rate for conforming loans (mortgage amount less than $417,000) increased to 3.92% as compared to 3.85% for the prior week. (Source: Bloomberg)
What it Means for Mortgage Borrowers
Initial reports on the Spring home buying season point to an increase in purchase and mortgage activity. The sustained improvement in the purchase mortgage application index over the past month and a half indicates that more home buyers are finding properties they can afford and using mortgages to finance their purchases. The decline in refinance activity is not too surprising given that many homeowners have already taken advantage of low rates and refinanced their mortgages over the past 12-18 months. Mortgage rates remain low although the .10% uptick in rates over the past two weeks is something to monitor. Low mortgage rates make buying a home more affordable and an unexpected jump in rates could undermine the mortgage and real estate markets. Prospective home buyers can use the INTEREST RATES feature on FREEandCLEAR to review updated interest rates and fees for mortgage lenders in their area. Additionally, get a jump on the Spring home buying season and use our Mortgage Qualification Calculator to determine what size mortgage and how much home you can afford.
The FREEandCLEAR Mortgage Expert