Mortgage Applications Rebound Modestly as ARM Share Hits Five-Week High

Mortgage application activity showed some signs of life last week, with a modest increase in purchase demand helping offset another decline in refinancing as mortgage rates reached their highest level in four weeks. The Mortgage Bankers Association (MBA) reported a 0.8% increase in total application volume on a seasonally adjusted basis for the week ending August 28. Purchase applications held down the fort, rising 2% from the previous week on a seasonally adjusted basis. Activity was still 0.2% below the same week one year ago, but the relatively stable year-over-year comparison suggests buyers are continuing to transact despite mortgage rates hovering near 7%. Refinance demand moved in the opposite direction. The Refinance Index fell 1% from the previous week and remained 19% below year-ago levels. Refinances also represented a slightly smaller share of overall activity, slipping to 41.8% from 42.0% the previous week. "Mortgage rates reached their highest levels in four weeks as investors’ concerns about inflation and growing deficits push yields higher across the globe," said Mike Fratantoni, MBA’s SVP and Chief Economist. There was another sign of borrowers adjusting to the rate environment. The adjustable-rate mortgage (ARM) share of activity climbed to 8.0% , its highest level in five weeks, as the average rate for a 5/1 ARM fell to 5.94%. FHA loans accounted for a smaller share of applications, while the VA share increased noticeably from the previous week.