Mortgage Rates Dip to 7.37%, Lifting Applications 3.4%

Mortgage applications rose 3.4% last week as the average rate on a 30-year fixed loan fell to 7.37%, its lowest in three weeks, the Mortgage Bankers Association said Wednesday.

The 30-year rate slipped from 7.41% in the week ending Oct. 23, the second straight weekly decline. Points, including origination fees, edged up to 0.76 from 0.75.

Applications to purchase a home rose 4% on a seasonally adjusted basis but were 18% below the same week a year ago. Refinance applications climbed 3% and were 61% lower than a year earlier.

“Mortgage rates declined for the second week in a row, with the 30-year fixed rate decreasing to 7.37 percent, the lowest in three weeks,” said Joel Kan, MBA’s vice president and deputy chief economist.

“The decline in rates gave borrowers some relief, with applications rebounding slightly, particularly conventional applications,” Kan said.

Rates fell across loan types. The average jumbo rate dropped to 7.28% from 7.33%, and the FHA rate eased to 7.12% from 7.13%. The 15-year fixed rate slipped to 6.70% from 6.73%.

The average rate on a 5/1 adjustable-rate mortgage fell to 6.41% from 6.46%. Adjustable loans made up 11.3% of applications, their highest share in more than a year.

The refinance share of activity was 38.9%. Government-backed loans remained a significant slice of the market, with FHA loans accounting for 16.6% of applications and VA loans 11.0%.

Most Owners Stay Locked In

Despite the dip, the 30-year rate is 107 basis points higher than a year earlier, and composite applications are 42.4% below their level a year ago, Econoday noted.

“Mortgage rates are still more than a percentage point higher than the same week last year and most homeowners still have rates much lower than prevailing market rates,” Kan said, adding that most borrowers have little to gain from refinancing.

About half of all borrowers hold a mortgage rate below 4%, according to the Federal Housing Finance Agency’s National Mortgage Database, CNBC reported. Real estate agents told the network that some buyers are waiting for midterm election results.

Kan said many homebuyers have put their purchase plans on hold. The weekly rebound was concentrated in conventional loans, HousingWire reported.

The Federal Reserve was widely expected to hold its benchmark rate at 3.75% to 4% on Wednesday after raising it in September, with futures markets pricing a likely hike in December, CNBC reported.

Fed officials are weighing whether inflation, pushed higher by energy costs and strong demand, will require more rate increases. The decision comes less than a week before the Nov. 3 midterm elections.

Mortgage rates follow longer-term Treasury yields more closely than the Fed’s short-term rate, but signals about further tightening from Chairman Kevin Warsh at his 2:30 p.m. news conference could move those yields.

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