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Mortgage application volume decreased by 6% last week, according to the latest Mortgage Bankers Association’s (MBA) weekly survey. A total of 17,820 applications were submitted, marking the lowest volume since 1995.
The 30-year fixed mortgage rate also reached its highest level since 2000 after four consecutive weeks of increases. Fixed rates had stayed below 7.47% for over 20 years until last week. As of September 29, fixed rates were 7.53% on average.
What Does Application Volume Consist Of?
Mortgage application volume is based on the number of 30-year fixed, refinance and purchase mortgage applications. The survey—which covers over 75% of all U.S. retail mortgage applications—uses responses from mortgage bankers, commercial banks and thrifts.
Application Volume Changes
- Applications to refinance a home loan fell 7% from the prior week, 11% lower than the same week last year. Refinances make up less than one-third of the total application volume.
- Mortgage purchase applications fell 6% last week, 22% lower than the same week one year ago.
Interest Rate Increases
- The average contract interest rate for a 30-year fixed-rate mortgage with conforming loan balances ($726,200 or less in most of the U.S.; the conforming loan limit is larger in some high-cost areas) rose to 7.53% from 7.41%.
- The average contract interest rate for 30-year mortgages with jumbo loan balances (greater than $726,200) increased to 7.51%.
- 15-year fixed-rate mortgages also increased to 6.86% from 6.73% a week prior.
Recent federal interest rate increases are a direct culprit of these increases. “Mortgage rates continued to move higher last week as markets digested the recent upswing in Treasury yields. Rates for all mortgage products increased, with the 30-year fixed mortgage rate increasing for the fourth consecutive week to 7.53%—the highest rate since 2000,” Joel Kan, MBA’s deputy chief economist, said in a press release.
Adjustable-Rate Mortgage and FHA Loan Applications Rise
Despite the increase in interest rates, more potential home buyers are seeking out adjustable-rate mortgages (ARMs) to lower their payments. In the MBA survey, the ARM share of loan applications increased to 8%, which is the highest since March 2023.
ARMs can offer fixed rates when the term starts, then fluctuate periodically for the rest of the term. This can allow a homeowner to save significantly during the beginning of their loan term. However, the average contract interest rate for ARMs also slightly increased to 6.49% from 6.47% a week prior.
The FHA share of total mortgage applications increased slightly to 14.5% from 14.1% a week earlier, indicating an increased reliance on government assistance for potential home buyers.
Bottom Line
As interest rates increase, potential home buyers are shying away from purchasing or refinancing new homes through traditional mortgage bankers. However, homeowners are also seeking affordable payment options, such as ARMs.
Before you decide on ARM, make sure you understand the potential increase in your interest rate, since the fixed period only lasts for a set amount of time.
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