- The average 30-year fixed mortgage rate for conforming loans fell to 7.37% from 7.41% last week, the second straight weekly decline, according to the Mortgage Bankers Association. Total application volume rose 3.4% from the prior week.
- Borrowers are reaching for riskier loans to get lower payments. The adjustable-rate share of applications rose to 11.3%, the highest in more than a year, with the average 5/1 ARM rate at 6.41%, down from 6.46%.
- Demand remains far below last year. Purchase applications rose 4% for the week but were 18% lower than a year earlier, and refinance applications, though up 3%, were 61% below last year, since about half of all borrowers have a mortgage rate below 4%.
- The broader housing data is grim. Contracts to buy resale homes in September fell to the weakest pace since record-keeping began in 2001, new-home sales dropped and permits and starts missed forecasts, with mortgage rates still above 7% and near levels not seen in almost three years, Bloomberg reported.
What Happened?
The MBA’s weekly survey showed a modest rebound in applications as rates eased, led by conventional loans. “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,” said the MBA’s Joel Kan. Agents say some buyers are waiting for the outcome of the midterm elections, according to CNBC. Bloomberg reported that listings have piled up in many parts of the country, forcing sellers to cut prices to make deals.
Why It Matters?
The rising ARM share is a warning sign: these loans reset to market rates after their fixed term, shifting rate risk onto households at a time when the Fed is debating more hikes. With most owners locked into rates far below today’s, the market is stuck with few sellers willing to move and buyers priced out, a standstill that weighs on homebuilders, brokers and mortgage lenders alike. Housing affordability has also become a key election issue, and the Trump administration has issued an executive order aimed at lowering some borrowing costs, including a pilot to cancel mortgage insurance on certain loans.
What’s Next?
Mortgage rates have not moved at the start of this week, according to Mortgage News Daily, but markets could move on any commentary from Fed Chair Kevin Warsh after today’s meeting. Investors will watch whether lower rates draw more buyers back before the midterms and whether the ARM share keeps climbing. Weak resale contracts point to soft closed sales data in the coming months.
