Refinance and ARM activity hit new highs
The refinance share of mortgage activity soared to 59.8% of total applications, up from 48.8% the previous week. Adjustable-rate mortgages (ARMs) also saw renewed interest, with their share rising to 12.9%, the highest since 2008.
“Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans, with the ARM share reaching its highest level since 2008,” Mike Fratantoni, MBA’s SVP and chief economist, said. “Notably, ARMs typically have initial fixed terms of five, seven, or ten years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans.”
Meanwhile, Kirk Todd, branch manager and senior loan originator at Choice Mortgage Group, has been advising clients that now is a good time to buy. An analysis by online lending marketplace LendingTree showed that millennials aged 28 to 43 made up nearly half (49.7%) of mortgage purchase inquiries in the US’s 50 largest metros in 2024. In tech centers, millennials drove 62.6% of inquiries in San Jose, 57.1% in Seattle, and 56.9% in San Francisco. He said if rates or prices drop further, more buyers will jump in, making competition tougher and likely pushing prices back up.
“Theoretically, property values will continue to go up,” Todd told Mortgage Professional America. “If you can get in now and afford it now, then you’re set up for refinance to a lower rate. Hopefully, in that period of time, it will have built up a bunch of equity. Even if appreciation goes back to 2.5% to 3.5%, which is a normal market, that’s a lot of money when you compound it.”
Product mix shifts as borrowers seek flexibility
The data showed a mixed picture for government-backed loans. The Federal Housing Administration (FHA) share of total applications decreased to 16.3%, while the VA share edged up to 15.8%. The USDA share slipped to 0.5%. Meanwhile, the average contract interest rate for 30-year fixed-rate mortgages with conforming balances fell to 6.39%, and FHA-backed loans dropped to 6.14%. Jumbo loans, however, saw a slight uptick to 6.48%.