The demand to finance a home surged as mortgage applications increased 3.1% for the week ending August 1, according to the Mortgage Bankers Association. The increase comes after applications decreased 3.8% the week prior.
In addition, mortgage interest rates remained fairly steady at 6.72% for a 30-year fixed mortgage, for the week ending July 31, according to Freddie Mac.
The Market Composite Index, a measure of mortgage loan application volume, increased 3.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 3% compared with the previous week.
The refinance index increased 5% from the previous week and was 18% higher than the same week one year ago.
The seasonally adjusted purchase index increased 2% from one week earlier. The unadjusted purchase index increased 1% compared with the previous week and was 18% higher than the same week one year ago.
Homeowners who decided to refinance increased to 41.5% of total applications from 40.7% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 8.5% of total applications.
There was a slight decrease in Federal Housing Administration loan applications to 18.5% from 18.8% the week prior.
Veterans Affairs loan applications increased to 13.3% from 12.2% the week prior. USDA loan applications also decreased, though slightly, to 0.5% from 0.6% the week prior.
“Mortgage rates moved lower last week, following declining Treasury yields as economic data releases signaled a weakening U.S. economy. As a result, the 30-year fixed rate decreased for the third straight week to 6.77 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
“Refinance applications increased to their strongest pace in four weeks after being on a downward trend the prior three weeks. The refinance share increased to almost 42 percent, its highest level since April.”
(Getty Images)
Contract rates
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.77% from 6.83%, with points decreasing to 0.59 from 0.60 (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 6.65% from 6.74%, with points increasing to 0.59 from 0.51 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
For 30-year fixed mortgages backed by the FHA, the average contract interest rate decreased to 6.47% from 6.56% , with points decreasing to 0.81 from 0.83 (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 6.03% from 6.12%, with points increasing to 0.66 from 0.64 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
For 5/1 ARMs, the average contract interest rate decreased to 6.06% from 6.22%, with points decreasing to 0.49 from 0.51 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week.
“Borrowers sought to take advantage of these lower rates, as both purchase and refinance applications increased over the week,” says Kan. “Purchase activity continued to lead 2024’s pace, as increasing for-sale inventory of homes has been supporting homebuying, but on the other hand recent weakness in the economic environment has deterred some prospective homebuyers.”
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.
