Mortgage activity slipped again, down 5.3% from the prior week, as both purchase and refinance requests fell. Purchase applications dropped 7% week over week, while refi filings edged 2% lower.
Refinance demand sits 59% below the same week last year. With rates now more than a full percentage point higher than a year ago, only a limited set of homeowners still stands to gain by refinancing.
The average contract rate for a 30-year fixed mortgage on conforming balances moved down to 7.41% from 7.50%. For borrowers putting 20% down, points - which include the origination fee - declined to 0.75 from 0.83.
"Mortgage rates decreased for the first time in over two months," said Joel Kan, an MBA economist. "However, lower rates were not enough to boost application activity, as both purchase and refinance applications continued to decline." Buyers are reacting less to small weekly changes and more to the overall higher level of rates.
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Shoppers who remain in the hunt are leaning on adjustable-rate mortgages to trim the initial payment. "The ARM share held steady at 10.5 percent, as ARM rates remained almost a full percentage point lower than the 30-year fixed rate, giving qualified borrowers a lower rate option to purchase a home," Kan said.
Higher borrowing costs are showing up in contracts too. According to the National Association of Realtors, September pending home sales fell sharply - a timely gauge since it reflects signed contracts - and borrowing costs remained high into October.
A separate read from Mortgage News Daily said rates have been mostly flat to start this week. Last week was especially volatile on multiple monthly inflation reports, and this week moves have appeared to track oil prices. But Matthew Graham, Mortgage News Daily's chief operating officer, cautioned against leaning on that link, writing, "It's been highly unreliable for more than a month."
The bottom line: housing demand is still constrained by the overall rate level, not the week-to-week wiggles. That points to a slow transaction market, with the ARM share holding steady at 10.5%.
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