Mortgage Applications Today: Home Loan Demand Cools Despite Rates Dropping to 11-Month Low

The demand for home loans eased but still ticked up 0.6% for the week ending Sept. 19, according to the Mortgage Bankers Association. The increase is not as significant as the 29.7% increase in mortgage applications for the week ending Sept. 12.

The continuing rise in applications comes after mortgage interest rates decreased again to 6.26% for the week ending Sept. 18, according to Freddie Mac. The new 11-month low came a day after the Federal Reserve lowered its benchmark interest rate for the first time in nine months.

The Market Composite Index, a measure of mortgage loan application volume, increased 0.6% on a seasonally adjusted basis from the week prior. On an unadjusted basis, the Index increased 0.1% compared with the previous week.

The refinance index increased 1% from the previous week and was 42% higher than the same week one year ago. The seasonally adjusted purchase index increased 0.3% from one week earlier.

The unadjusted purchase index decreased 1% compared with the previous week and was 18% higher than the same week one year ago.

Homeowners continued to refinance. The refinance share of mortgage activity increased to 60.2% of total applications from 59.8% the previous week, but the adjustable-rate mortgage (ARM) share of activity decreased to 8.9% of total applications.

“Mortgage rates declined further last week, with the 30-year fixed rate falling to its lowest level since last September to 6.34 percent," said Mike Fratantoni, MBA’s senior vice president and chief economist.

"Interest rates generally have moved up following the FOMC meeting last week but remain in a range that should continue to lead to increased refinance activity. Refinance volume increased further last week and is now 80 percent higher than four weeks ago, accounting for more than 60 percent of all application activity."

The Federal Housing Administration (FHA) share of total applications decreased to 15.7% from 16.3% the week prior.

Veterans Affairs share of total applications increased to 17.5% from 15.8% the week prior. The USDA share of total applications decreased to 0.4% from 0.5% the week prior.

Contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.34% from 6.39%, with points increasing to 0.57 from 0.54 (including the origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate decreased from last week.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.44% from 6.48%, with points decreasing to 0.34 from 0.35 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.  

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA remained unchanged at 6.14%, with points increasing to 0.74 from 0.68 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.70% from 5.63%, with points increasing to 0.69 from 0.58 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 5.53% from 5.65%, with points increasing to 0.49 from 0.41 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 

"The refinance boost last week was from government applications, with VA refinance volume up almost 15 percent. While homebuyer demand typically tends to decrease during the fall, purchase application activity remains relatively strong right now, running 18 percent ahead of last year’s pace," says Fratantoni.

Mortgage rates calculated

Mortgage rates are calculated by various factors in the economy, and the length of your loan will also figure into the mortgage rate you qualify for.

The 30-year mortgage rate is tied to the yield of the 10-year Treasury note, according to Fannie Mae. As the yield on the 10-year Treasury note moves, mortgage rates follow.

The yield on the 10-year Treasury note is determined by expectations for shorter-term interest rates in the economy over the duration of a bond, plus a term premium.