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Homebuyer demand for purchase loans faltered last week as mortgage rates touched new 2024 highs, spurring more borrowers to opt for adjustable-rate loans, according to a weekly survey of lenders by the Mortgage Bankers Association.

The MBA’s Weekly Mortgage Applications Survey showed requests for purchase loans were down by a seasonally adjusted 1 percent last week when compared to the week before, and off 15 percent from a year ago. Applications to refinance were down 6 percent week over week, but up 3 percent from a year ago.

“Mortgage rates continued to move higher last week, reaching their highest levels since late 2023 and putting a damper on applications activity,” MBA Deputy Chief Economist Joel Kan said in a statement. “The 30-year fixed rate increased for the third consecutive week to 7.24 percent, the highest since November 2023.”

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Kan said purchase applications declined as would-be homebuyers hit pause due to strained affordability and low supply. Adjustable-rate mortgages (ARMs) accounted for 7.6 percent of loan applications, up from 6.4 percent in February, “consistent with the upward trend in rates, as buyers look to reduce their potential monthly payments.”

Mortgage rates retreat from 2024 highs

Data tracked by Optimal Blue shows borrowers were locking in rates on 30-year fixed-rate mortgages Tuesday at an average rate of 7.16 percent Tuesday.

That’s up 66 basis points from a 2024 low of 6.50 percent registered on Feb. 1, but down from a 2024 high of 7.21 percent seen on April 16 and last year’s high of 7.83 percent, registered on Oct. 25.

Mortgage rates have surged in April as incoming economic data shows inflation remains well above the Federal Reserve’s target of 2 percent.

Consumer Price Index (CPI) data released on April 10 showed prices rising by 3.5 percent in March from a year ago, up from 3.2 percent annual growth in February.

The CPI report was followed by an April 15 data release showing surprisingly strong growth in retail and food services sales in March.

Mortgage rates expected to fall gradually

Source: Fannie Mae, Mortgage Bankers Association forecasts, April 2024.

MBA and Fannie Mae economists now agree that mortgage rates will come down only gradually this year and next as Fed policymakers wait for more evidence that they’re winning their war on inflation.

For the week ending April 19, the MBA reported average rates for the following types of loans:

• For 30-year fixed-rate conforming mortgages (loan balances of $766,550 or less), rates averaged 7.24 percent, up from 7.13 percent the week before. With points increasing to 0.66 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans, the effective rate also increased.
• Rates for 30-year fixed-rate jumbo mortgages (loan balances greater than $766,550) averaged 7.45 percent, up from 7.40 percent the week before. With points increasing to 0.56 from 0.46 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 30-year fixed-rate FHA mortgages, rates averaged 7.01 percent, up from 6.90 percent the week before. Although points decreased to 0.94 from 0.99 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• Rates for 15-year fixed-rate mortgages averaged 6.75 percent, up from 6.64 percent the week before. With points unchanged at 0.64 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.
• For 5/1 adjustable-rate mortgages (ARMs), rates averaged 6.64 percent, up from 6.52 percent the week before. With points increasing to 0.87 from 0.60 (including the origination fee) for 80 percent LTV loans, the effective rate also increased.

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Email Matt Carter