During the holiday-shortened week, government-backed mortgages led the housing market, according to data from the Mortgage Bankers Association. Despite a 5.2% drop in mortgage applications, interest in government-backed loans rose while demand for standard loans decreased. This shift occurred as mortgage rates increased for the second consecutive week, reaching 7.07% for a 30-year fixed-rate mortgage.
Despite a decline in overall mortgage applications, purchase activity decreased by only 4% during the holiday week. Refinancing saw a more significant decline of 7%. However, both Veterans Administration (VA) and Federal Housing Administration (FHA) loans saw an increase in their share of the market. This growth in government-backed loans helped offset some of the overall decline in mortgage applications.
Mike Fratantoni, Senior Vice President and Chief Economist at MBA, noted that first-time homebuyer demand is driving the market. Many first-time buyers are utilizing government lending programs to make their purchases possible. While standard mortgage loans saw a decrease in demand, government-backed loans are becoming increasingly popular among homebuyers due to their affordability and flexibility compared to traditional mortgages.
Overall, despite declining overall demand for mortgages during the holiday week, government-backed mortgages continued to be popular among homebuyers and refinancers alike. The rise in VA and FHA loan applications shows that these programs are still providing much-needed support to those who may not qualify for traditional mortgages.
In conclusion, while there was a decrease in overall mortgage applications during the holiday week, government-backed mortgages continued to lead the housing market as they became increasingly popular among first-time homebuyers and refinancers alike. With rising interest rates and declining demand for standard mortgages, it’s likely that we’ll see more people turning to government lending programs in the future as they look for affordable options to purchase or refinance their homes.
