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Home loan applications in the U.S. declined for a second week in a row, but at a slower pace, and there was an increase in demand for the riskier adjustable-rate mortgages as homebuyers look for best deals, survey data from the Mortgage Bankers Association showed on Wednesday.
The market composite index, a measure of the house purchase mortgage loan application volume, fell a seasonally adjusted 4.7 percent in the week ended October 3 after a 12.7 percent slump in the previous week.
The MBA survey also showed that the refinance index declined 8 percent, which was much slower than the 21 percent drop in the previous week. The purchase index dropped 1 percent, same as in the previous week.
The refinance share of mortgage activity decreased further to 53.3 percent of total applications from 55.0 percent in the previous week.
The 30-year fixed mortgage rate fell to 6.43 percent, after climbing to 6.46 percent in the previous week.
“With mortgage rates on fixed-rate loans little changed last week, refinance application activity generally declined, with the exception of a modest increase for FHA refinance applications,” MBA’s SVP and Chief Economist Mike Fratantoni said. “Refinance volume remains somewhat elevated relative to levels of a month ago.”
Despite the recent weakening, purchase activity continues to show moderate growth on an annual basis, and stronger growth for FHA loans, favored by first-time homebuyers, the economist noted.
The survey showed that the adjustable-rate mortgage, or ARM, share of activity climbed to 9.5 percent of total applications from 8.4 percent.
“Our survey shows 5/1 ARM rates are averaging almost a percentage point below 30-year fixed rates, and this differential is leading more purchase and refinance applicants to consider ARMs,” Fratantoni added.
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