Mortgage Applications Today: Home Loans Retreat but Refinancing Ticks Higher

Mortgage applications rose this week as growing refinancing volume offset a decline in purchase applications, according to the Mortgage Bankers Association.

For the week ending April 10, the MBA's Market Composite Index, a measure of total mortgage loan application volume, increased 1.8 percent on a seasonally adjusted basis from one week earlier.

The seasonally adjusted Purchase Index decreased 1% from one week earlier and was 3% lower than the same week one year ago on an unadjusted basis.

However, the Refinance Index increased 5% from the previous week and was 15% higher than the same week one year ago, when mortgage rates were notably higher.

The uptick in refinancing came as mortgage rates retreated last week following a fragile ceasefire in the U.S.-Israeli war with Iran. Mortgage rates had climbed shaprly after the war began, driven by higher oil prices.

“Given the evolving situation in the Middle East and its impact on energy and commodity prices, mortgage rates declined last week,” says Joel Kan, MBA’s vice president and deputy chief economist. “This dip in rates helped to support an increase in conventional refinance applications, which had declined for five consecutive weeks."

However, purchase applications, a leading indicator for home sales, dipped in another troubling sign for the spring housing market, which has struggled to gain momentum amid soaring gas prices and concerns about the economy in the wake of the war.

"Purchase activity remained subdued as potential homebuyers remained hesitant given the current economic uncertainty, which kept purchase applications below last year’s level for the second consecutive week," says Kan. "Conventional purchase applications were essentially unchanged over the week, while FHA and VA purchase applications declined.”

The FHA share of total applications decreased to 18.2% from 19.3% the week prior. The VA share of total applications decreased to 15.7% from 16.1% the week prior. The USDA share of total applications remained unchanged at 0.5% from the week prior.

The refinance share of mortgage activity increased to 45.5% of total applications from 44.3% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 8.4% of total applications.

According to MBA calculations, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances decreased to 6.42% from 6.51% the prior week, with points increasing to 0.62 from 0.61.

Freddie Mac's calculations put average 30-year rates at 6.37% for the week ending April 9.

Mortgage rates calculated

Mortgage rates are calculated based on 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.