Mortgage applications increased 6.2% this past week as interest rates fell for the fourth week in a row.
Mortgage applications rose last week, as interest rates decreased for the fourth week in a row, hitting their lowest levels since mid-September, as a positive jobs report and the results of the midterm election bolster the outlook.
For the week ending Nov. 6 the Mortgage Bankers Association's Market Composite Index—a measure of total mortgage loan application volume—increased 6.2% on a seasonally adjusted basis from one week earlier.
The Purchase Index, which measures the volume of mortgage applications to purchase a single-family home, increased 8% from one week earlier after seasonal adjustment. Purchase applications were down 18% from a year ago.
According to MBA calculations, the average contract interest rate for 30-year fixed mortgages with conforming loan balances is 7.21%, a slight decrease from last week's rate of 7.3%. Rates averaged 5.99% a year ago.
Mortgage rates dropped to 7.18% last week from 7.21% the week before, according to a separate survey from Freddie Mac.
“Mortgage rates declined for the fourth straight week,” said Joel Kan, MBA’s vice president and deputy chief economist. “The declining trend in rates helped to spur stronger application activity, although the pace of purchase and refinance applications remain considerably lower than a year ago."
In recent weeks, high interest rates had pushed more buyers toward riskier Adjustable Rate Mortgages. However, this past week, ARM applications decreased to 10.9% of the total. applications, down from 11.4% the previous week.
FHA and VA loans saw "particularly strong growth" this past week, said Kan.
The share of FHA loan applications decreased to 15.5% from 16% the prior week. The VA share of total applications increased to 12% from 11.2% the prior week. And the USDA share of total applications decreased to 0.5% from 0.6% the week prior.
The refinance share of mortgage activity remained unchanged at 39.8%, but was 57% lower than the same week one year ago, as homeowners remain locked into their lower interest rates.
October's positive jobs report, which showed that the U.S. economy added 165,000 nonfarm jobs in October, has increased the odds that the Federal Reserve will raise interest rates when it next meets in December.
(Realtor.com) CME Group's FedWatch has the likelihood of an additional rate hike at around 77%.
The positive jobs report news was compounded by broad Democrat wins in the midterm elections. Democrats, many of whom ran on a message of affordability, won the majority in both the House and the Senate. Voters aged 18 to 34 and men aged 18 to 49 had ranked housing costs as a top political issue in a rcent CNBC survey.
Trump's former Federal Housing Commissioner Frank Cassidy called the midterms a "wake-up call."
"Everyone needs to get serious about tackling and addressing housing affordability. It can't be ignored anymore," he told Realtor.com®.
How mortgage rates are calculated
Mortgage rates are calculated based on various factors in the economy, and the length of your loan and credit score will also factor into the mortgage rate you qualify for.
the 10-year Treasury note, because most 30-year mortgages are either paid off or refinanced in roughly eight to 11 years.
That makes the duration on the loans roughly comparable, and mortgage lenders use the 10-year Treasury as a benchmark for setting rates, adding on a risk premium.
Long-term yields for Treasury notes are determined by a number of factors, including the supply of and demand for U.S. government debt, and investor expectations for inflation over the life of the bonds.