Housing affordability is gradually improving as home price growth also slows.
Applications for mortgage refinancing have risen from a year ago as declining interest rates allow homeowners to lower their monthly payments, according to new Mortgage Bankers Association (MBA) data released on Oct. 22.
Mortgage loan applications slipped 0.3 percent in the week ended Oct. 17, marking a fourth consecutive weekly decline, the MBA’s latest Weekly Mortgage Applications Survey showed.
While new purchase activity has cooled over the past month, refinancing demand remains strong.
Refinance activity rose 4 percent from the previous week and is up 81 percent from a year ago, “as borrowers remain attentive to these opportunities to lower their monthly mortgage payment,” says Joel Kan, MBA’s deputy chief economist and vice president.
The data indicate that conventional refinances have risen by 6 percent from last week, and Federal Housing Administration refinance applications have increased by 12 percent.
Mortgage borrowing costs have declined for the third straight week, with the average contract interest rate on 30-year fixed-rate mortgages at 6.37 percent.
Despite the tariff-driven springtime volatility in the financial markets, interest rates have dropped sharply over the past 10 months, declining from the mid-January high of 7.09 percent.
Mortgage rates typically track the benchmark 10-year Treasury yield, which has fallen below 4 percent for the second time in the past year.
The steady downward trend in rates has also bolstered the adjustable-rate mortgage (ARM) market.
Applications for ARMs—interest rates that change periodically with market conditions—increased by 16 percent from last week. They now account for 11 percent of the mortgage market, “with the ARM rate more than 80 basis points lower than the 30-year fixed rate,” notes LoanDepot’s chief economist and CIO Jeff DerGurahian.
The average rate for 15-year fixed-rate mortgages slipped to 5.74 percent from 5.77 percent.
Housing Affordability Outlook
Industry experts anticipate interest rates to decrease further in the year ahead, citing the Federal Reserve’s easing cycle and solid demand for Treasury securities amid uncertainty.
The prospect of sub-6 percent mortgage rates by the end of the year is “within reach,” says DerGurahian, signaling potential relief for the U.S. housing market.
By Andrew Moran
