Mortgage rates tick up for the first time in 3 months

By Aarthi Swaminathan

Mortgage rates increase on the back of reports of a growing U.S. economy, industry group says

The numbers: Applications for mortgages dipped as the 30-year mortgage rate rose for the first time in three months.

The 30-year rate inched up slightly but still remained close to a two-year low. Despite the big drop in interest rates over the past few weeks, the response from home buyers has been lukewarm.

Activity as measured by the market composite index - a measure of mortgage application volume - was down in the past week, according to the Mortgage Bankers Association on Wednesday.

The market index fell 1.3% to 292.3 for the week ending Sept. 27 from a week ago. A year ago, the index stood at 178.2.

Key details: The purchase index - which measures mortgage applications for the purchase of a home - rose 0.7% from a week prior. Purchase application activity was up over 9% as compared to the same period a year ago.

The refinance index fell by 2.9%.

Rates rose across the board.

The average contract rate for the 30-year mortgage for homes sold for $766,550 or less was 6.14% for the week ending Sept. 27. That's up from 6.13% a week before.

The rate for jumbo loans, or the 30-year mortgage for homes sold for over $766,550, was 6.5%, up from 6.47% the previous week.

The average rate for a 30-year mortgage backed by the Federal Housing Administration was 6.06%, up from 5.99% a week ago.

The 15-year was up to 5.51% from 5.47% the previous week.

The rate for adjustable-rate mortgages was up to 5.87% from 5.76%.

The big picture: Mortgage rates rose across the board as the financial markets digested reports of the U.S. economy growing in the spring. The report indicated that even though the economy had its weak bits, it was still expanding overall, which brings into question the pace of future rate cuts by the Federal Reserve.

As for home buyers, the response to lower rates has thus far been relatively tepid. Home prices continue to remain elevated, and affordability is strained for many.

Additionally, many potential buyers are also homeowners, who are still being held back by their ultra-low rate on their current home. Trading in an ultra-low rate for a higher one could increase their monthly payment to an unaffordable level, which discourages them from acting.

What the MBA said: "The news for the week was that more homebuyers appear to be entering the market," Mike Fratantoni, chief economist at the MBA, said in a statement.

"Purchase application activity was up for the week and increased more than 9% compared to last year at this time," he added. "Inventories of both new and existing homes have been increasing over the course of 2024, meaning that potential buyers have properties to look at and now have somewhat lower mortgage rates, leading to better affordability."

-Aarthi Swaminathan

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10-02-24 0700ET

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