Home lending slowed to close out 2023, as borrowers appeared to take the holidays off, and markets reacted to the expectation that lower interest rates are on their way, according to the Mortgage Bankers Association.
In the final release looking at 2023 volumes, the MBA's Market Composite Index, which tracks weekly application activity based on surveys of the trade group's members,
The swift pullback in interest rates came to a halt as well, with the main conforming average among MBA lenders edging higher for the first time in seven weeks.
"Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023," said Joel Kan, MBA vice president and deputy chief economist, in a press release.
The 30-year fixed conforming rate for mortgages rose by 5 basis points last week to 6.76% from 6.71% seven days earlier. Borrower points also increased to 0.61 from 0.55 for 80% loan-to-value ratio transactions.
While moderating rates pushed application volumes higher during much of November and December, borrowers paused at the end of the year, leading to decreases in both purchases and refinances.
"The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response," Kan said.
The seasonally adjusted Purchase Index slid 5.4% from two weeks earlier and sat 12.2% below its level from a year ago. But
Meanwhile, the Refinance Index plummeted 18.2% over the final two weeks of 2024, but climbed up 15.2% year over year "still at very low levels," according to Kan. The share of refinances relative to overall volumes fell to 36.3%, declining from 39.4% and 39.7% the prior two weeks. Some industry leaders, though, see some
Government-backed activity, which saw some significant jumps in the fall, pulled back over the final two weeks of the year. The seasonally adjusted Government Index declined 13.4%, and the percentage of federally guaranteed loan activity also shrank. Applications coming through the Federal Housing Administration decreased to 14.5% from 15% week over week, and Department of Veterans Affairs-sponsored volumes contracted to 14.6% from 17.3% seven days earlier. U.S. Department of Agriculture-backed applications managed to nab an incrementally larger slice of 0.5%, rising from 0.4% a week earlier.
Other 30-year mortgage rates tracked by the MBA also edged higher to finish 2024. The average contract rate of the 30-year jumbo mortgage climbed up a single basis point to 6.86% from 6.85% seven days prior. Points used to bring down the rate increased to 0.41 from 0.34.
The 30-year fixed-contract FHA-backed mortgage ended the year at an average of 6.51, also rising one basis point from 6.5% week over week. Points came in at 0.86, rising from 0.73 for 80% LTV-ratio loans.
The contract 15-year fixed rate headed in the other direction, though, falling 15 basis points to 6.26% from 6.41%. Borrowers typically used 0.73 worth of points compared to 0.5 a week earlier.
The 5/1 adjustable-rate mortgage took an even larger weekly drop of 55 basis points, falling to an average of 5.71% from 6.26%. Points remained at 0.59 from one week prior. Despite the decline, the share of adjustable-rate mortgage applications decreased to 6% of total activity from 6.3%.
