A 10 basis point decline in mortgage rates last week wasn’t enough to spur consumer demand for mortgages, according to the latest figures from the Mortgage Bankers Association.
For the week that ended June 2, mortgage applications fell 1.4% from the prior week. That was despite mortgage rates dropping to 6.81% from 6.91% during roughly the same period.
“Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week,” said Joel Kan, MBA’s vice president and deputy chief economist. “Overall applications were more than 30% lower than a year ago, as borrowers continue to grapple with the higher rate environment.”
After more than a year of steady rate increases by the Federal Reserve, the FOMC is expected to pause hikes at its upcoming meeting next week. But that might depend on the upcoming inflation reading scheduled on June 13, the same day of the meeting.
The MBA data showed that the average 30-year fixed rate for conforming loans ($726,200 or less) decreased to 6.81% last week from 6.91% the previous week. For jumbo loan balances (greater than $726,200), the rate decreased to 6.74% from 6.78% in the same period, according to the MBA.
However, at Mortgage News Daily, rates were even higher on Wednesday morning, at 6.89%.
Last week, federal lawmakers reached a deal on the U.S. debt ceiling and avoided a default on June 1, which could have pushed rates up by several percentage points.
Refinancing applications declined 1% last week compared to the previous week and were 42% lower than the same week one year ago. However, the refinance share of mortgage activity increased to 27.3% of total applications from 26.7% the previous week. Meanwhile, the purchase index decreased by 2% from one week earlier and was 27% lower than last year’s level on an unadjusted seasonal basis.
“Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market, while there continues to be very little rate incentive for refinance borrowers,” said Joel Kan.
Regarding loan types, the adjustable-rate mortgage (ARM) share of mortgage apps remained unchanged at 6.8% of total applications, the MBA data shows.
The Federal Housing Administration loans’ share rose to 13.2% from 12.7% the week prior. The U.S. Department of Veteran Affairs loans’ share increased to 12.5% from 12.1% in the same period. And the U.S. Department of Agriculture loans’ share decreased one basis point to 0.4% of the total applications.