New home purchases propel mortgage applications

Still there has been a notable growth slowdown…

New home purchases propel mortgage applications

Mortgage applications increased 3.3% week over week, driven by a surge in purchase applications, according to data from the Mortgage Bankers Association (MBA).

MBA chief economist Joel Kan attributed the modest increase to a 5% jump in purchase applications, although he noted that the annual growth rate of 6.2% for new home purchase applications was the slowest since September 2023

“March is typically a month when new home purchases see a seasonal boost, but this year March applications for new home purchases saw less than a 1% increase over the prior month on an unadjusted basis,” Kan said in its report. “Applications were still ahead of last year’s pace, but at 6%, the annual growth rate was the slowest since September 2023.”

The 3.3% uptick in overall applications came despite a rise in mortgage rates, with the 30-year fixed rate reaching 7.13% - the highest level since December 2023.

“Rates increased for the second consecutive week, driven by incoming data indicating that the economy remains strong and inflation is proving tougher to bring down,” said Kan. “Despite these higher rates, application activity picked up, possibly as some borrowers decided to act in case rates continue to rise.”

Refinance applications saw only a slight 0.5% increase, thanks to a 3% gain in conventional refinances. The refinance share of total mortgage activity decreased to 32.1% from 33.3% the previous week.

The share of Federal Housing Administration (FHA) loans increased slightly to 12.3%, while VA loans dropped to 12.4% from 14% the previous week.

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“Homebuyers remain adversely impacted by strong home-price growth and mortgage rates hovering around 7%,” Kan added. “The FHA share of applications did increase in March, exceeding 26%, compared to a 24% average for the prior 12 months. A higher FHA share can be a sign of more first-time buyer activity, but that segment of buyers is also more sensitive to affordability challenges.”

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