Refinancing ticked up as 30-year rates eased to a one-month low
Mortgage demand in the United States edged higher in early April as a modest drop in rates drew existing borrowers back to the refinance window while prospective buyers largely stayed on the sidelines.
Data from the Mortgage Bankers Association (MBA) showed overall applications rose 1.8% in the week ending April 10. That's the first increase in five weeks after a 0.8% decline the week before.
Refinance activity climbed 5% and was 15% higher than the same week a year earlier, while the seasonally adjusted purchase index slipped 1% and sat 3% below year-ago levels.
The average contract rate on a 30-year fixed mortgage with conforming balances fell to 6.42% from 6.51%, its lowest reading in about a month.
MBA’s Vice President and Deputy Chief Economist Joel Kan tied the move directly to geopolitical tensions and their impact on bond markets.
“Given the evolving situation in the Middle East and its impact on energy and commodity prices, mortgage rates declined last week. The 30-year fixed rate decreased to 6.42%, its lowest level in a month,” Kan said.
“This dip in rates helped to support an increase in conventional refinance applications, which had declined for five consecutive weeks,” Kan said.
“Purchase activity remained subdued as potential homebuyers remained hesitant given the current economic uncertainty, which kept purchase applications below last year’s level for the second consecutive week.”
Refi share climbs as government demand softens
The refinance share of activity increased to 45.5% of total applications, up from 44.3% the prior week.
Adjustable-rate mortgages accounted for 8.4% of applications, reflecting limited appetite for rate risk even as 5/1 ARM rates held around the mid 5% range.
Conventional purchase applications were flat week over week. “FHA and VA purchase applications declined,” Kan said, as the FHA share of total volume slipped to 18.2% and VA share to 15.7%, while USDA business held at 0.5%.
Rates ease from recent highs, but buyers stayed cautious
The latest MBA figures arrived after several weeks in which long-term US mortgage rates climbed to their highest levels in nearly seven months before easing slightly in early April, according to recent Freddie Mac data and other market surveys. Those moves echoed the volatility in Treasury yields as investors reacted to the Iran conflict and swings in oil prices.
In a separate release on new-home demand in March, the MBA’s Builder Application Survey showed applications for loans on newly built homes rose 11% year over year and 26% from February, hitting the highest index level since that survey began in 2012.
Kan said that buyers were drawn to move-in-ready inventory and government-backed loans as they looked for affordability in a higher-rate environment.
Modest rate relief continues to unlock activity from rate-sensitive refinancers. Purchase demand, however, remains constrained by affordability, economic uncertainty and uneven inventory.
As a result, incremental rate moves – rather than broad enthusiasm from buyers – are likely to dictate spring volume.
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