Purchase loan demand was up 11 percent last week, with “surprisingly strong” demand from conventional loan borrowers given lingering economic uncertainty, MBA economist Mike Fratantoni says.
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Homebuyers moved to take advantage of a dip in mortgage rates last week, despite economic uncertainty that has rates rebounding this week, according to a weekly survey of lenders by the Mortgage Bankers Association.
Applications for purchase loans were up a seasonally adjusted 11 percent last week when compared to the week before and 13 percent from a year ago, the MBA’s Weekly Mortgage Applications Survey found. Requests to refinance also climbed 11 percent week over week, to a level 51 percent higher than a year ago.
Mike Fratantoni
“The economic news last week included a negative reading for first-quarter GDP growth and further signs of contraction in the manufacturing sector, mixed with a solid employment report for April,” MBA Chief Economist Mike Fratantoni said in a statement. “The net impact on mortgage rates was mostly downward but just back to levels from early April.”
Mortgage rates range-bound
Mortgage rates have been range-bound this year, with 30-year fixed-rate mortgages oscillating between 6.5 percent and 7 percent, according to rate lock data tracked by Optimal Blue.
At 6.82 percent on Tuesday, rates on 30-year fixed-rate conforming mortgages were closer to a 2025 high of 7.05 percent registered on Jan. 14 than the low for the year of 6.48 percent, seen on April 4.
Mortgage rates climbed sharply during the first week in April as tariffs announced by the Trump administration renewed worries about inflation. Those worries have been tempered by hopes that the U.S. will negotiate trade agreements with countries subject to tariffs, and fears that tariffs will lead to a recession.
Federal Reserve policymakers left short-term interest rates unchanged after wrapping up a two-day meeting Wednesday, and a June rate cut is now seen as off the table as the Fed assesses the Trump administration’s “substantial policy changes” in areas including tariffs, immigration, taxation and regulations.
Purchase loan applications on the rise
Source: Mortgage Bankers Association Weekly Applications Survey.
At 162.8, the MBA’s seasonally-adjusted purchase loan index was up from 146.6 the week before and 144.2 a year ago, but down 6 percent from a month ago. The index was benchmarked at 100 in March 1990.
Fratantoni said a 13 percent surge in demand last week for conventional purchase loans eligible for backing by Fannie Mae and Freddie Mac was “a surprisingly strong move given lingering economic uncertainty.”
Conventional loan borrowers “tend to have larger loan sizes and [are] more apt to be move-up buyers,” Fratantoni noted. The average loan size for conventional purchase loans was $475,000, compared to $357,500 for government-backed FHA and VA loans.
First-time homebuyers accounted for a record 56 percent share of purchase mortgages securitized by Fannie Mae, Freddie Mac and Ginnie Mae during the first three months of the year, according to an analysis by Intercontinental Exchange Inc. (ICE).
ICE’s latest Mortgage Monitor Report showed first-time homebuyers accounted for 80 percent of FHA purchase originations and about half of purchase mortgages backed by Fannie and Freddie.
“While first-time homebuyers continue to face affordability headwinds, they don’t have the same disincentive to transact as many repeat buyers, who remain locked in the golden handcuffs of relatively low monthly payments on their existing homes,” ICE analyst Andy Walden said in a statement.
Andy Walden
“Younger homebuyers are picking up market share with lenders this spring, with people age 35 and under accounting for more than half of financed home purchases by first-time buyers in Q1.”
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