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Homebuyer demand for mortgages weakened slightly last week even as mortgage rates continued to retreat from 2023 highs, breaking a streak of four consecutive weeks of growth in purchase loan applications, according to a weekly survey of lenders by the Mortgage Bankers Association.

The MBA’s Weekly Mortgage Applications Survey shows that after adjusting for seasonal variations, applications for purchase loans were down 4 percent last week when compared to the week before and 35 percent from a year ago. Requests to refinance were also down 3 percent week over week and 35 percent from a year ago.

“Spring has arrived, but the housing market is missing the customary burst in listings and purchase activity that typically mark the season,” said MBA Chief Economist Mike Fratantoni in a statement. “After four weeks of increasing purchase application activity, volume declined a bit this week even with another small drop in mortgage rates.”

Another trend worth noting is that while rates declined for borrowers seeking conforming loans eligible for purchase by Fannie Mae and Freddie Mac, rates on jumbo loans moved in the opposite direction last week.

In their most recent economic and housing forecast, Fannie Mae economists said ongoing banking instability sparked by the failures of Silicon Valley Bank and Signature Bank may affect the availability of jumbo mortgages and residential construction loans, a staple offering of small and midsized banks.

“While we have seen relative weakness at the high end of the housing market in recent months, the divergence in rates suggests that banks may be tightening credit in response to recent challenges, preserving balance sheet capacity as deposit balances have declined,” Fratantoni said. “In recent years, most jumbo loans have been kept on depository balance sheets.”

Jumbo loans now carry highest rates

The Optimal Blue Mortgage Market Indices, which track daily ups and downs in mortgage rates using rate lock data, show rates on 30-year fixed-rate conforming mortgages hitting a 2023 peak of 6.84 percent on March 8.

While rates on conforming loans have come down more than 50 basis points since then, jumbo loan rates haven’t fallen as sharply, and rates for the bigger loans now exceed those for conforming loans.

For the week ending March 31, the MBA reported average rates for the following types of loans:

  • For 30-year fixed-rate conforming mortgages (loan balances of $726,200 or less), rates averaged 6.40 percent, down from 6.45 percent the week before. With points decreasing to 0.59 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also decreased.
  • Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $726,200) averaged 6.36 percent, up from 6.27 percent the week before. Although points decreased to 0.47 from 0.54 (including the origination fee) for 80 percent LTV loans, the effective rate increased.
  • For 30-year fixed-rate FHA mortgages, rates remained unchanged at 6.33 percent. With points decreasing only slightly to 0.92 from 0.93 (including the origination fee) for 80 percent LTV loans, the effective rate remained unchanged.
  • Rates for 15-year fixed-rate mortgages averaged 5.97 percent, up from 5.84 percent the week before. Although points decreased to 0.54 from 0.57 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
  • For 5/1 adjustable-rate mortgages (ARMs), rates averaged 5.61 percent, down from 5.62 percent the week before. But with points increasing to 1.02 from 0.91 (including the origination fee) for 80 percent LTV loans, the effective rate increased.

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Email Matt Carter

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