Mortgage Rates Edge Lower While Loan Application Volume Spikes

Mortgage Rates, Mortgages
You can trust that we maintain strict editorial integrity in our writing and assessments; however, we receive compensation when you click on links to products from our partners and get approved. Here's how we make money.
mortgage rates

Freddie Mac’s weekly survey of lenders finds mortgage rates have moved lower for the most popular loan terms, as mortgage application volume is back on the rise. Loan applications were up 11.8% on a seasonally adjusted basis this week, led primarily by an uptick in government loan applications, according to new data from the Mortgage Bankers Association. This week’s mortgage rates:

  • 30-year fixed-rate mortgages dropped to 3.79% with an average 0.6 point for the week ending Oct. 22, 2015.  A year ago, the rate averaged 3.92%.
  • 15-year fixed rates averaged 2.98% with an average 0.5 point. The same term priced at 3.08% a year ago.
  • 5-year adjustable-rate mortgages priced at 2.89% with an average 0.4 point. Last year at this time, the same ARM averaged 2.91%.

Compare mortgage rates now

“Following Federal Reserve Governor Daniel Tarullo’s remarks last week, Treasury yields dipped. In response, 30-year mortgage rates fell 3 basis points this week to 3.79 percent,” Sean Becketti, chief economist for Freddie Mac, says in a release. “The housing market continues to benefit from low mortgage rates, with housing starts for September beating expectations and the NAHB’s Housing Market index registering a 10-year high in October.”

mortgage roundup chart october 22

Loan applications, home affordability both increase

The increase in loan applications comes after a sharp decrease last week, largely thought to be a short-term result of the new “Know Before You Owe” disclosure rules. Mike Fratantoni, MBA’s chief economist, said in a statement Wednesday that he expects application volume to remain volatile over the next few weeks as those disclosures are implemented.

Still, this week’s upward movement could indicate that the market is rebounding from the pressure of the change to closing disclosure rules, which — combined with continued low interest rates — caused a rush of applications before they went into effect on Oct. 3.

Government FHA, VA and USDA loans all saw increases in volume for the week ending Oct. 16, which may be an indication that more first-time home buyers are stepping into the fray, as these loans are made with low down-payment requirements.

Today’s announcement of a drop in interest rates mean those borrowers can afford more house for their money, as lower rates mean lower monthly payments.

Borrowers may further be helped by the fact that home affordability has edged higher, according to the National Association of Realtors Housing Index, which rose to its highest level since May based on August data. A lower median price for single-family homes, slightly higher median family income and continued low interest rates combine to bring homeownership into reach for more people.

More from NerdWallet:

Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: Twitter: @arioshea.

Image via iStock