A drop in buyer demand caused total mortgage application volume to fall 0.6% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
Applications to purchase a home fell 2% for the week, the fourth straight week of declines. Purchase demand is down nearly 7% compared with four weeks ago. Volume, however, is still 26% higher than one year ago.
The drop may be seasonal, although not much has conformed to normal patterns in the year of Covid-19. It may be more a factor of the incredibly low supply of homes for sale. Inventory continues to set record lows, especially at the entry level of the market.
Strong demand is outstripping any new supply coming onto the market, thanks to consistently low mortgage rates, which set a new record two weeks ago.
Rates did move slightly higher last week. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) increased to 3.02% from 3%, with points increasing to 0.36 from 0.32 (including the origination fee) for loans with a 20% down payment. That rate was a full percentage point higher a year ago.
The tiny move higher did not dampen demand for refinances. That volume rose 0.2% from the previous week and was 74% higher than a year ago.
“Despite the uptick in rates, refinance activity held steady, with FHA refinance applications posting a 17.6% increase, helping to offset declines in the other loan types,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
The refinance share of mortgage activity increased to 66.1% of total applications from 65.6% the previous week.