Mortgage applications increased modestly in the week ending Aug. 28, even as borrowing costs climbed to their highest level in four weeks. The Mortgage Bankers Association said stronger purchase activity more than offset a decline in refinancing, suggesting that homebuyers remain active in markets where inventory provides more options.
Key takeaways
- The MBA’s Market Composite Index rose 0.8% from the prior week.
- Purchase applications increased 2%, while refinance applications fell 1%.
- The average rate for a 30-year fixed mortgage edged up to 6.79%.
- Adjustable-rate mortgages represented 8% of total activity, a five-week high.
The weekly results indicate that purchase demand is providing a measure of support for overall mortgage activity despite elevated rates. While the increase was modest, it helped push the composite index higher.
Purchase activity offsets refinancing decline
The MBA’s Purchase Index rose 2% during the week, although it remained slightly below its level a year earlier. At the same time, the Refinance Index declined 1%, reflecting the limited savings available to homeowners who would be replacing existing loans at current rates.
Refinancing accounted for 41.8% of all mortgage applications, down from 42% the previous week. The shift highlights the growing importance of home-purchase transactions in sustaining lending volume.
Higher rates create a challenging backdrop
The average contract rate for a 30-year fixed-rate mortgage with a conforming balance of $832,750 or less increased to 6.79%, up from 6.78%. Although the weekly change was minimal, rates have moved higher as investors respond to concerns about inflation and expanding government deficits worldwide.
Higher rates can raise monthly payments and reduce buyers’ purchasing power. They can also discourage homeowners from refinancing, particularly those who locked in substantially lower rates in earlier years.
Inventory may be supporting buyers
MBA Chief Economist Mike Fratantoni said that buyers in many local markets have a relatively broad selection of homes. That availability may be helping sustain transaction activity even while financing costs remain elevated.
More inventory can give prospective buyers additional negotiating leverage and reduce pressure to make rapid decisions. However, the effect varies by market, with affordability still shaped by local prices, wages and the supply of listings.
Adjustable-rate mortgages gain ground
Adjustable-rate mortgages made up 8% of application activity, the highest share in five weeks. The increase suggests some borrowers may be considering alternatives to fixed-rate financing as they weigh current payment levels.
ARMs can offer lower initial rates than fixed mortgages, but their payments may change later as market conditions shift. Borrowers evaluating these loans must consider the potential for future rate increases alongside the initial savings.
Overall, the latest MBA figures point to a housing market in which purchase demand remains resilient but sensitive to financing costs. Continued inventory growth could help support activity, while the direction of mortgage rates will likely remain a major factor for both buyers and lenders.