Mortgage Applications Today: Home Loan Demand Slips Again as Mortgage Rates Edge Higher

Mortgage applications decreased another week by 4.7% for the week ending Oct. 3, according to the Mortgage Bankers Association. The decrease comes as the government shutdown is in its second week and mortgage rates ticked up again.

The average mortgage rate on a 30-year fixed home loan increased to 6.34% for the week ending Oct. 2, according to Freddie Mac. That's an increase from 6.3% the week prior.

The Market Composite Index, a measure of mortgage loan application volume, decreased 4.7% n a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 5% compared with the previous week.

The Refinance Index decreased 8% from the previous week and was 18% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 1% from one week earlier. The unadjusted Purchase Index decreased 1% compared with the previous week and was 14% higher than the same week one year ago.

“With mortgage rates on fixed-rate loans little changed last week, refinance application activity generally declined, with the exception of a modest increase for FHA refinance applications,” said Mike Fratantoni, MBA’s senior vice president and chief economist.

The refinance share of mortgage activity decreased to 53.3% of total applications from 55% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 9.5% of total applications.

The Federal Housing Administration (FHA) share of total applications increased to 18.5% from 16.8% the week prior.

Meanwhile, the Veterans Affairs share of total applications increased to 16.3% from 16.2% the week prior. The USDA share of total applications remained unchanged at 0.4% from the week prior.

“Refinance volume remains somewhat elevated relative to levels of a month ago. Purchase activity declined by about 1 percent for the week but continues to show moderate growth on an annual basis, and stronger growth for FHA loans, favored by first-time homebuyers," Fratantoni added.

Contract rates

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) slightly decreased to 6.43% from 6.46%, with points decreasing to 0.60 from 0.61 (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) increased to 6.60% from 6.54%, with points increasing to 0.44 from 0.40 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.  

The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 6.19% from 6.24%, with points decreasing to 0.73 from 0.76 (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 increased to 5.77% from 5.76%, with points increasing to 0.79 from 0.68 (including the origination fee) for 80% LTV loans. The effective rate increased from last week.

The average contract interest rate for 5/1 ARMs decreased to 5.49% from 5.74%, with points increasing to 0.74 from 0.46 (including the origination fee) for 80% LTV loans. The effective rate decreased from last week. 

"The ARM share increased to 9.5 percent last week from 8.4 percent the prior week. Our survey shows 5/1 ARM rates are averaging almost a percentage point below 30-year fixed rates, and this differential is leading more purchase and refinance applicants to consider ARMs," Fratantoni said.

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.