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Mortgage demand is now heavily skewed toward refinancing, with interest rates falling for a fifth straight week.
Total mortgage application volume rose just 1.6% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index.
The average contractual interest rate on 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) fell to 6.43% from 6.44%, with the percentage point increase to 0.56 from 0.54 (including origination fees) for loans with a 20% down payment. The rate was 78 basis points higher than the same week a year ago.
Home loan refinance applications fell 0.3% for the week but were 94% higher than a year ago. That may sound like a huge increase, but it comes from a very low number. Still, it’s the only bright spot in a business that has been pushed off the edge by rising interest rates and very weak home buying.
“Refinance applications fell slightly but continued to show strong year-over-year gains as borrowers with higher rates refinanced to lower their monthly payments,” said Joel Kahn, a business economist. “The refinance share of applications averaged nearly 46 percent in August, the highest monthly average since March 2022.”
Mortgage applications for a home rose 3% for the week but were still 4% below the same week a year ago. Home sales have been sluggish all summer, with buyers facing sky-high home prices; low interest rates haven’t been enough to persuade them to abandon their purchases.
Demand for government loans has driven the uptick. Federal Housing Administration and Veterans Affairs loans offer low or no down payment options, which are popular with lower-income buyers.
Mortgage rates didn't see much movement Tuesday, with all eyes on the monthly employment report and other economic data due later in the week.
