The Mortgage Bankers Association (MBA) reported on Wednesday that the mortgage application volume in the U.S. jumped by 14.2% in the week ending September 13.
MBA’s Weekly Applications Survey offers a comprehensive analysis of mortgage application activity. Since the survey’s inception in 1990, its indexes have been a leading indicator of housing and mortgage finance activity.
The average contract interest rate for 30-year fixed-rate mortgages dropped to 6.15% from 6.29% the previous week. The purchase index grew by 5% from the previous week, while the refinance index jumped 24%.
Commenting on the latest survey results, MBA Deputy Chief Economist Joel Kan stated: “Application activity was up significantly last week, as market expectations of a rate cut from the Fed pulled mortgage rates lower. It is notable that conventional purchase applications increased to a pace ahead of last year, which also drove overall purchase applications very close to year-ago levels.”
The Federal Reserve is expected to deliver its latest policy decision later today. In recent speeches, Fed Chair Jerome Powell hinted on multiple occasions that a rate cut was likely to happen in September if inflation data continued its downward path. In addition, the “vast majority” of the Federal Open Market Committee (FOMC) members supported the idea of lowering rates in September during July’s meeting. The annual inflation rate in the US for August came in at 2.5%, lower than analysts predicted. Meanwhile, the Fed’s favorite inflation indicator, Personal Consumption Expenditures (PCE) rose 0.5% in July. Both results strengthen the case for a rate cut after four years.
Traders are divided over how big the rate reduction will be. CME Group’s FedWatch tool shows traders pricing in a 65% chance of a half-point cut and 35% odds of a quarter-point move. This rate cut is a big deal for the economy. But it’ll take some time for American consumers to feel the effects.
