Mortgage Applications Today: New Homeowner Loan Demand Climbs to 3-Year High as Interest Rates Fall

Home loan applications jumped 9.2% from a week earlier, reaching the highest level in more than three years for the week ending Sept. 5, according to the Mortgage Bankers Association. These results include an adjustment for the Labor Day holiday.

The surge comes after mortgage interest rates slipped to an 11-month low. The average rate on a 30-year fixed home loan was 6.5% for the week ending Sept. 4, according to Freddie Mac. The rate was down from the prior week when it was 6.56%.

The Market Composite Index, a measure of mortgage loan application volume, saw a 9.2% increase on a seasonally adjusted basis from the previous week. On an unadjusted basis, the Index decreased 3% from a week ago. 

The refinance index increased 12% from the previous week and was up 34% from the same period a year ago.

The seasonally adjusted purchase index grew 7% from a week earlier. The unadjusted purchase index decreased 6% compared with the previous week and was 23% higher than the same week one year ago.

The amount of homeowners refinancing swelled. The refinance share of mortgage activity increased to 48.8% of total applications from 46.9% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.2% of total applications.

The Federal Housing Administration (FHA) share of total applications decreased to 18.5% from 19.9% the week prior.

Veterans Affairs share of total applications increased to 15.3% from 13.8% the week prior. The USDA share of total applications increased to 0.6% from 0.5% the week prior.

"Mortgage rates declined for the second consecutive week as Treasury yields moved lower on data indicating that the labor market is weakening," said Joel Kan, MBA’s vice president and deputy chief economist. "The downward rate movement spurred the strongest week of borrower demand since 2022, with both purchase and refinance applications moving higher."

The economist added that purchase applications reached the highest level since July and continued to run more than 2% ahead of last year's pace.

Contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.49% from 6.64%, with points decreasing to 0.56 from 0.59 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $806,500) decreased to 6.58% from 6.67%, with points decreasing to 0.39 from 0.44 (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 decreased again to 6.31% from 6.35%, with points decreasing to 0.74 from 0.80 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.84% from 6.03%, with points increasing to 0.84 from 0.77 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.

The average contract interest rate for 5/1 ARMs decreased to 5.9% from 5.94%, with points decreasing to 0.34 from 0.68 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 

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.